EXHIBIT 99.218
CALIFORNIA INDEPENDENT SYSTEM OPERATOR:
SCHEDULING AND BALANCE OF BUSINESS SYSTEMS
UTILITY INDUSTRY RESTRUCTURING
Electric power utilities are undergoing significant restructuring in many
countries. The trend started in the 1980's in the UK and some Latin American
countries, and has gained momentum in the 1990's. The motivations and driving
forces for restructuring of the electric power sector in different countries are
not the same. In some countries, such as the UK and the Latin American
countries, privatization of the electric energy sector has been the key driver
and the restructuring has provided much funds from the private sector to
government coffers. In the U.S., where the energy sector is for the most part
owned by the private sector, the key drivers have been customer choice,
increased competition and reduced regulation. Large energy customers along with
energy brokers have been placing immense pressure on federal and state
governments for full competition in wholesale and retail energy sectors. The
Federal Energy Regulatory Commission (FERC) and state regulators have taken a
series of initiatives in the direction competitive energy markets as a result of
these pressures.
Keeping with tradition, California is the first in the nation with a massive
industry restructuring plan which includes full retail competition. Other states
are expected to imminently follow suite. This would entail the development of
new information systems not only for those entities that plan and operate these
new energy markets, such as the Independent System Operator in California, but
also all other energy market participants such as energy brokers and retailers
and large energy customers.
RESTRUCTURING OF ENERGY MARKETS IN CALIFORNIA
In 1995, the California Public Utilities Commission (CPUC) ordered the
restructuring of the electric utility industry in California to allow for full
competition in the retail and wholesale electricity markets starting in January
1998. Under the plan, two completely independent and not-for-profit
organizations called the Power Exchange (PX) and the Independent System Operator
(ISO) would be created to facilitate the operation of the competitive energy
market in California. The PX will conduct competitive energy auction and develop
energy schedules based on the result of its auction. The ISO will coordinate the
energy schedules from the PX with those of other market participants (Scheduling
Coordinators or SCs), will operate the power system and will settle and bill for
deviations from schedules and for transmission related services. ISO will have
no financial interest in any other energy market participant. Other major market
participants in the California energy market will be the Utility Distribution
Companies (UDCs), and the Transmission Owners (TOs).
Starting in 1995, California's investor owned utilities (IOUs) in collaboration
with all other energy market stakeholders, including the regulators and customer
advocates, formed a number of advisory groups under a common banner called the
Western Power Exchange (WEPEX). WEPEX advisory groups were to refine the
California utility industry restructuring plan and to develop and design
governance, administrative, business and technical protocols and systems for the
PX and ISO. The restructuring plan was by and large completed by Fall of 1996
and was, with minor modifications, codified by the California legislature under
an Assembly Bill (AB 1890). As part of the restructuring plan a $250M trust was
established to fund the development of all facilities and systems required for
the California new energy market including the development of the PX and ISO. A
trustee (David Freeman) was selected to oversee the development of these
facilities and systems. A trust advisory committee (TAC), formed by
representatives from all stakeholders in the California energy market, would
advise the trustee.
The California new energy market is unique in many of its aspects and its design
is still being refined.
DEVELOPMENT OF THE INDEPENDENT SYSTEM OPERATOR
For development purposes, the ISO has been divided into several systems and the
development of each system has been awarded to a contractor through a
competitive bid. These systems and the entities developing them are:
- A Power Management System (PMS) to monitor and control generation
and transmission facilities within ISO controlled grid and interties
with neighboring utilities - ABB is developing this system.
- A Scheduling System to coordinate energy schedules from the PX and
SCs - the ISO Alliance is developing this system.
- A Balance of Business Systems (BBS) to settling accounts related to
ISO and to bill various market participants - the ISO Alliance is
developing this system.
- Metering Data Acquisition System (MDAS) to collect load and
generation data for revenue metering purposes - UTS is developing
this system.
- A Data Communication System (WEnet) for voice and data to
communicate with market participants, to control and monitor the
power grid, and to collect metering data - MCI is developing this
system.
- "Information System" to manage databases, help desk, data transfers
between systems - ISSC is planning for and will be "managing" this
system.
A program manger (Duke Engineering and Services - D&ES) has been selected
through a competitive bidding process to manage the development of all the ISO
systems. DE&S would also prepare the ISO sites to house these systems as well as
the ISO personnel. The primary ISO site will be in Folsom (near Sacramento) with
the backup site in Alhambra (near Los Angeles).
ISO ALLIANCE
Perot Systems Energy Group has teamed with ABB Power T&D Company Inc. (ABB) to
develop the ISO Scheduling and Balance of Business systems. Ernst and Young, LLP
(E&Y), as a subcontractor to ABB, is also working with the Alliance.
ISO SCHEDULING SYSTEM
The ISO Scheduling System will asses whether the forward market schedules
collected from the various energy market participants (PX and SCs) can be
accommodated by the transmission grid, will make adjustments to the requested
schedules as necessary, and will consolidate these schedules into a final
schedule that is feasible for the reliable operation of the ISO transmission
system. The ISO Scheduling System will also ensure all necessary ancillary
services (services required for the reliable operation of the ISO transmission
system) are competitively procured. Finally, the ISO Scheduling System is used
to operate a competitive "real-time" energy market to ensure that generation and
demand match in real-time.
The ISO Scheduling System has been divided into two subsystems: The Scheduling
Infrastructure Subsystem (SI) and Scheduling Applications Subsystem (SA). SA
will consist of a series of computer applications that would provide the ISO
scheduling functionality described above. SI will provide the interface between
the ISO and the market participants. SI also encompasses the basic hardware and
software systems needed to run the Scheduling Applications.
ISO BALANCE OF BUSINESS SYSTEM
The ISO Balance of Business System consists of three "independent" subsystems:
1) a Settlement Subsystem to settle with market participants for real-time
energy deviation charges, ancillary services charges, transmission related
(e.g., congestion) charges and administrative fees and to produce and send out
settlement statements to market participants; 2) a Billing and Credit Subsystem
to process credit and debit invoices, prepare and execute payments to market
participants and manage accounts receivables; and 3) an Administrative Subsystem
to support various corporate business functions such as the general ledger,
budget; cost accounting, etc.
PROJECT MANAGEMENT
The project to develop the ISO Scheduling and Balance of Business System started
in March 1997 and is slated for completion by December 31, 1997. Currently ABB
is developing all the elements of the ISO Scheduling System. E&Y is developing
the Balance of Business System. The development phase of the project will be
completed by late summer at which time integration and testing of the system
will
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commence. PSC, in addition to project management responsibilities which includes
client(s) interaction and technical consulting to ABB and E&Y, will integrate,
test and document all the components of the ISO Scheduling and Balance of
Business systems. PSC will also train the client(s) on the use of the these
systems.
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