EXHIBIT 99.452

BRIEFING PAPER ON FIRM TRANSMISSION RIGHTS (FTRS)

The ISO seeks the involvement of California Market Participants in developing a
Firm Transmission Rights (FTRs) proposal that will meet California's needs as
well as those of others in the Western Interconnection. To provide a foundation
for the development of an FIR proposal, this White Paper was created. The paper
provides the background necessary to understand what FTRs are and why they are
needed. It also describes the work that has been completed to date to develop a
proposal for FTRs and provides a plan for developing the ISO's proposal for
FTRs.

PRE-ISO TRANSMISSION RIGHTS PROCESS

Currently, firm transmission service on the transmission system in California is
provided under existing contracts or through Open Access Tariffs (OATs) and is
based on a system of physical transmission rights. That is, before scheduling a
transaction on the system, it is first necessary to obtain the right to use that
system from the transmission owner or a current fights holder. Transmission
capacity is only available to fights holders and the total amount of firm fights
should equal the capability of the system.

PROBLEMS WITH PRE-ISO TRANSMISSION PRICING AND SCHEDULING

Over the years, several shortcomings, such as economic inefficiency have been
associated with the existing approach toward the scheduling and pricing of
transmission. Three of the specific problems are discussed below:

1) FIXED COSTS BIAS TRANSACTIONS - The current system for pricing transmission
relies on recovering the fixed costs of that system through transmission rates
based on embedded costs and FERC guidance on issues such as "and/or" pricing.
While transmission prices based on fixed costs can vary with demand, they cannot
properly represent the marginal value of that transmission capacity for several
reasons.

Transmission rates are bound at the upper end by FERC imposed caps based on the
fixed cost of the transmission facilities. On the other hand, while transmission
prices are often discounted during periods of low demand to reflect a lower
market value, there is little incentive for the transmission owners to price
that service near zero even though that may be the market value. Therefore,
while transmission prices do vary somewhat with demand, they do not accurately
represent the marginal value of the transmission capacity.

2) PANCAKING OF TRANSMISSION RATES - Because many different entities own the
transmission rights, a transmission user may need to purchase rights from
several entities to complete one transaction and may therefore have to pay
several transmission rates (pancaking).

3) HOARDING OF TRANSMISSION CAPABILITY - With the current system of having to
obtain a right before scheduling a transaction, an entity that owns the rights
may be a competitor to an entity that is trying to acquire those rights. Holding
back blocks of transmission

capacity that are not expected to be used, until it is too late for competitors
to put together competing deals, is termed hoarding transmission.

HOW THE CALIFORNIA ISO CURRENTLY ADDRESSES THESE PROBLEMS FOR CONVERTED RIGHTS

In the development of the California ISO, the aforementioned shortcomings of the
current system of pricing and scheduling transmission were addressed by changing
the basic approach towards these issues.

1) FIXED-COST RECOVERY IS NO LONGER FROM INCREMENTAL TRANSACTIONS - To address
the current economic inefficiencies of recovering the fixed costs of
transmission facilities through usage-based transmission rates, a new
transmission pricing scheme was devised where the end-use customers (load) pay
for the fixed costs of the transmission system. By recovering fixed transmission
costs from load, incremental transmission transactions can be priced on the
marginal value of that service and will no longer be significantly biased by
fixed cost recovery (except for wheeling out and wheeling through transactions).
This should result in a more economically efficient allocation of transmission
capability.

2) PANCAKING OF RATES IN ISO GRID ELIMINATED - With the ISO transmission pricing
approach, the only usage-based charges for transactions on the ISO grid are
losses and congestion costs. Therefore the pancaking of fixed cost based usage
rates has been eliminated within the ISO grid. A transmission customer may face
multiple congestion charges under the ISO's proposal. However, under the ISO's
proposed two zone system, multiple charges are unlikely in the near term.

3) TRANSMISSION CAPACITY CANNOT BE HOARDED - To address hoarding, a new approach
towards scheduling was developed that allows transmission users to schedule
transactions without first obtaining transmission rights to use the system.
Hoarding remains a concern only with existing contract capacity.

NEW TRANSMISSION ISSUES CREATED WITH ISO APPROACH

With the ISO's approach towards transmission scheduling and pricing, three new
issues were created that did not exist under the previous system: transmission
congestion management, transmission price uncertainty, and the integration of
ISO transmission with existing contracts.

CONGESTION MANAGEMENT - The ISO's congestion management scheme is designed to
make the most economically efficient use of the transmission system by
allocating transmission to those that value it the most through the use of
adjustment bids. Usage charges (congestion charges) are assigned to specific
congested inter-zonal transmission paths based on the users marginal value of
that capacity. This method sends the proper marginal cost signals to the
trans5ission users and should greatly improve economic efficiency over the
pre-ISO scheme. Absent a scheme for congestion management, allowing all entities
that want to schedule across an interface the ability to do so at no cost could
create a situation where the planned usage of the transmission exceeds its
capacity.

PRICE UNCERTAINTY - With the implementation of congestion management, entities
essentially pay zero for transmission when there is no congestion and pay the
fill marginal cost of that transmission capacity during periods when there is
congestion. While this provides for greater economic efficiency, it also results
in price uncertainty for transmission users.

INTEGRATION OF EXISTING CONTRACTS - The new approach results in inconsistencies
between the resolution of congestion under existing contracts and converted
rights, along with the potential inefficiencies of idle capacity under the
former.

FIRM TRANSMISSION RIGHTS ADDRESS PRICE UNCERTAINTY FOR TRANSMISSION

The implementation of Firm Transmission Rights (FTRs) addresses the issue of
price uncertainty. FTRs can provide transmission users with fixed-price
transmission service across the ISO-controlled grid by hedging

hourly variations in the cost of transmission service due to congestion. An FTR
provides the holder with the right to receive the congestion revenue generated
by a specific amount of transmission on a specific interzonal interface, for a
specific period of time.

Therefore, if a scheduling coordinator schedules over an interface where it
holds FTRs equivalent to its schedule and there is congestion, the scheduling
coordinator will be revenue neutral regardless of the magnitude of The
congestion costs. The congestion charges would flow from the scheduling
coordinator, Through the ISO, and back to the FTR holder/scheduling coordinator.

By using an FTR, a user is able to obtain price certainty for transmission
service. The exposure to congestion costs in The day ahead market is limited by
what the scheduling coordinator had to pay to purchase the FTR.

As the ISO suggested to FERC in 1997, it is possible that the unregulated
marketplace could develop similar price-hedging instruments in a secondary
market. However, this issue is now moot since the ISO has been directed by FERC
to define and administer a set of FTRs, to ensure that grid users can obtain
transmission service at a fixed price.

FIRM TRANSMISSION RIGHTS CAN ALSO PROVIDE "SCHEDULING CERTAINTY"

Some transmission users would like FTRs to provide more than just financial
certainty for transmission. They would also like FTRs to provide certainty of a
specific scheduling path so that a specific resource can be scheduled to a
specific load (for financial certainty of an energy price). An FTR can be
structured to provide this "scheduling certainty." See Attachment 1 for a
detailed discussion of this aspect of an FTR.

PREVIOUS WORK ON FTR PROPOSAL

Approximately one year ago, the various committees and work groups that were
developing the overall ISO filing developed a proposal for an FTR mechanism
called a Transmission Congestion Contract (TCC). Though the parties reached a
consensus on many issues, several key issues were unresolved: 1) whether the TCC
should provide scheduling priority during times when the ISO does not have
sufficient economic information to clear congestion; 2) how many TCCs should be
made available to the market in the first few years; 3) the mechanism (i.e.,
auction type) to bring TCCs to market; and, 4) who should not be allowed to
purchase TCCs. As a result of a lack of consensus on these issues and other
concerns, the ISO advised FERC it would delay any FTR filing, noting the
following:

1. Considerable uncertainty exists about the value of congested
transmission under market conditions.

2. There is already considerable firm transmission capacity under
contract, and a secondary market may develop on its own,
making Transmission Congestion Contracts or Physical
Transmission Rights unnecessary.

3. The overall restructuring proposal is complex and
comprehensive. Implementation must be staged, and other
features of the proposal such as implementation of ancillary
services, imbalances and congestion management must take
priority over developing Transmission Congestion Contracts or
Physical Transmission Rights.

4. Any system of transmission access should interface seamlessly
with access throughout the WSCC. Premature commitment to a
specific approach

could prevent use of compatible systems between the Northwest and the
California ISO.

To address reason #1 above, the ISO will have several months before the first
FTR auction (possibly in September) to gain experience concerning the value of
congested transmission paths. Reason #2 above has become a non-issue because
FERC has directed the ISO to make a filing to insure that an FTR option is
available. Reason #3 above is a less prominent concern because the ISO is
working through the complexities that were identified in the earlier filing.

To address #4, the ISO and other interested parties have participated in a group
formed through the Western Regional Transmission Association (WRTA) called the
Firm Transmission Rights Work Group (FTRWG). The FTRWG is discussed in the next
section of this paper. In addition, a neighboring ISO in the northwest called
Independent Grid Operator (IndeGo) has developed a proposal for how it would
develop FTRs.

FIRM TRANSMISSION RIGHTS WORK GROUP

As a result of concerns expressed in neighboring states over the approach that
California might take on FTRs, the Western Regional Transmission Association
(WRTA) formed a group called the Firm Transmission Rights Work Group (FTRWG).
The ISO participated as a member of this group, along with approximately 24
other organizations (see Attachment 6) representing a broad cross-section of
market participants. However, many segments of the California Market were not
represented.

That work group has developed an FTR proposal that is based on a consensus of
the various entities in the entire Western Region. The FTRWG proposal is
intended to be used by developing ISOs as a starting point for their own FTR
proposals.

The primary goal of the FTRWG was to develop a consistent approach across the
Western Interconnection that would facilitate transactions across the region.
The California ISO is not obligated to follow any aspects of the FTRWG proposal,
though in the interest of developing a model that facilitates regional
transactions, the FTRWG proposal should be given thorough consideration.

FERC'S JULY 30, 1997 ORDER

FERC's July 30, 1997, order stated that the ISO's FTR proposal must satisfy
certain principles. First, FERC stated that the ISO's proposal must enable all
transmission users to obtain service that is as good as or superior to the
services provided under the Order 888 Pro Forma Tariff (i.e., network and
point-to-point transmission service). Second, FERC stated that the ISO's FTR
proposal should not allow participants to withhold transmission capacity from
the market. Finally, FERC stated That the FTRs must be resellable.

FERC also emphasized that the ISO must demonstrate how its proposal complies
with the Commission's ISO principles. Specifically, the ISO must demonstrate how
its FTR proposal will promote the efficient use

of and investment in generation, transmission, and consumption. In addition, the
ISO's FTR proposal should allow the ISO to manage transmission constraints
effectively and promote efficient trading.

FBRC's order also stressed the importance of selecting an initial term for the
FTRs that would allow the participants to gauge the value of the FTRs before
committing to longer-term transmission rights. The FERC stated that a limited
initial term would also permit the ISO to reconcile its proposal with other FTR
proposals in the West.

SCHEDULE FOR FILING AND IMPLEMENTATION

The ISO's current goal is to meet the FERC imposed deadlines of June 30, 1998
for the FTR filing and January 1, 1999 for implementation. To meet these goals,
the following schedule is suggested:

1) On March 12, 1998, hold the first stakeholders meeting.

2) By May 2Q, 1998, the stakeholder group completes their review
of past work, identifies issues requiring resolution, develops
a consensus position on issues, and submits the consensus
position to the ISO Board.

3) By June 17, 1998, a final proposal is submitted to the ISO
Board for a decision at the June 25 Board meeting.

4) By June 30, 1998, the ISO submits the filing to FERC. 5) By
January 1, 1999, the ISO implements the FERC approved FTR
proposal.

COMPARISON OF FTR PROPOSALS

Table 1 provides a comparison of proposals that the ISO can use as a starting
point for developing a California proposal. Provided after the table is a brief
description of each of the issues.

The proposals being compared include the original ISO proposal (Transmission
Congestion Contracts; TCCs), the FTRWG proposal (FTRs), and IndeGo's proposal
(Transmission Capacity Reservations; TCRs). As can be seen from Table 1, other
than for issues 2-5, there is a great deal of consensus between the various
proposals. While all the issues are described after the table, there is a need
to pay special attention to the more controversial issues.

TABLE 1
COMPARISON OF FTR PROPOSALS

<Table>
<Caption>
ISSUE (REFER TO THE PAGES FIRM TRANSMISSION
FOLLOWING THE TABLE FOR AN ORIGINAL CA ISO TCC RIGHTS WORK GROUP
EXPLANATION OF THE ISSUES) PROPOSAL CONSENSUS INDEGO TCR PROPOSAL
- -------------------------- ------------------- ----------------- -------------------

1) ARE FTRs REQUIRED TO No Decision was Reached FTRs are not required FTRs are not required
SCHEDULE? IF NOT, DO FTRs to schedule but they do to schedule but they do
PROVIDE SCHEDULING provide scheduling provide scheduling
PRIORITY? priority. priority.(1)

2) HOW MANY FTR'S 10% Reasonable Amount All, Some will be
SHOULD BE RELEASED exempt TCRs
IN THE FIRST YEAR?

3) WHAT SHOULD BE THE Multi-round market No recommendation No recommendation
FORMAT OF THE ISO'S clearing price auction.
AUCTION?

4) WHO IS NOT ALLOWED TO 1)ISO or, 2)ISO, UDCs, ISO ISO
PURCHASE FTRs? and TOs

5) ARE FTRs USED AS A No No recommendation Yes
MEANS TO INTEGRATE
EXISTING CONTRACTS WITH
ISO TRANSMISSION

6) WHO RECEIVES THE Used to reduce the Used to reduce the Used to reduce the
REVENUE FROM THE ANNUAL access charge of the access charge of the access charge of the
FTR AUCTION? transmission owner. transmission owner. transmission owner.

7) WHAT SHOULD BE THE Non-simultaneous path Non-simultaneous path Non-simultaneous path
BASIS FOR DETERMINING HOW rating rating rating
MANY TCR'S TO AUCTION?

8) WHO CONDUCTS THE ISO ISO ISO
PRIMARY AUCTION FOR FTRs?

9) WHAT SHOULD THE INITIAL 1 year 11 year 1 year
TERM BE IN THE PRIMARY
AUCTION?

10) WHAT SHOULD THE BASIC 1 MW 1 MW 1 MW
UNIT OF AN FTR BE?(2)

11) WHAT HAPPENS TO FIRs FTRs are reduced prorata FTRs are reduced prorata FTRs are reduced prorata
WHEN INTERFACE
</Table>

- ----------

(1) Because of differences between the IndeGo and CA-ISO congestion management
schemes, it is less likely that IndeGo will encounter the situation where
transmission has to he allocated based on who has FTRs.

(2) Given that FTRs will be adjusted prorata to match the actual interface
capacity, the MW capacity purchased should be viewed as a percentage share of
the transmission capability rather than a fixed MW quantity.

CAPABILITY IS REDUCED

12) SHOULD FTRs BE Unidirectional Unidirectional Unidirectional
BI-DIRECTIONAL OR
UNDIRECTIONAL

13) WHO GETS THE FTR Those who pay for Those who pay for Those who pay for
REVENUE FROM NEWLY the facilities the facilities the facilities
CONSTRUCTED FACILITIES

14) SHOULD FTRs BE Yes Yes Yes
ASSIGNABLE IN THE
SECONDARY MARKET?

15 SHOULD THE ISO OR ISO does not run No recommendation ISO does not run
SOMEONE ELSE SET UP secondary market secondary market
THE SECONDARY MARKET? but tracks rights but tracks rights
holders on the holders on the
OASIS OASIS
</Table>

DESCRIPTION OF THE ISSUES LISTED IN TABLE 1

MORE CONTROVERSIAL ASPECTS OF THE FTR PROPOSAL

Several of the issues were found to be controversial in prior California ISO
discussions and in the FTRWG. These issues include the following:

1) SHOULD FTRs BE REQUIRED TO SCHEDULE? IF NOT, SHOULD FTRs PROVIDE SCHEDULING
PRIORITY WHEN THE ISO DOES NOT HAVE SUFFICIENT ECONOMIC INFORMATION TO CLEAR
CONGESTION? -- See Attachment 1.

2) HOW MANY FTRs SHOULD BE RELEASED IN THE FIRST YEAR? - Should all of the FTRs
be auctioned off in the first year or should only a small amount (10%) be
auctioned? See Attachment 2.

3) WHAT SHOULD BE THE FORMAT OF THE PRIMARY AUCTION? - Singe round, two round,
or multiple round? As-bid or market learing price? See Attachment 3.

4) WHO IS NOT ALLOWED TO PURCHASE FTRs? - Should the TOs and UDCs be allowed to
purchase FTRs? See Attachment 4.

5) ARE FTRs USED AS A MEANS TO INTEGRATE EXISTING CONTRACTS WITH ISO
TRANSMISSION? See Attachment 5.

Each of these controversial issues is given special attention in the attachments
to this White Paper.

LESS CONTROVERSIAL ASPECTS OF THE FTR PROPOSAL

6) WHERE DO THE FTR AUCTION PROCEEDS GO? - All of the proposals assume that the
FTR Auction Proceeds will go to offset the fixed costs of the underlying
transmission system.

7) WHAT SHOULD BE THE BASIS FOR DETERMINING HOW MANY FTRs TO AUCTION? - FTRs
will be defined across inter-zonal interfaces. There appears to be a consensus
among the three groups shown in Table 1 to use the non-simultaneous rating of
the interface. The non-simultaneous ratings are determined through technical
studies and through regional coordination. However, other proposals have
advocated use of simultaneous ratings as a more realistic picture of system
capability. Simultaneous ratings often vary by the time of day or season, while
non-simultaneous ratings tend to be much more constant. In addition, most paths
are currently allocated based on non-simultaneous ratings rather than
simultaneous ratings. Thus basing FTRs on non-simultaneous ratings would be more
consistent with present practices.

8) WHO CONDUCTS THE PRIMARY AUCTION FOR FTRs? -- Current proposals provide that
the ISO implement the primary market for FTRs. However, some participants may
support having the secondary market created by the market and accommodated by
the ISO, if possible.

9) WHAT SHOULD THE INITIAL TERM BE IN THE PRIMARY AUCTION? - One year has been
suggested as a good initial term for the primary auction. Because of uncertainty
regarding the value of FTRs, a longer term may not be desirable. In addition,
with a one-year limit, there could be a convenient opportunity each year to
create and eliminate new zones. If FTRs were to have a term of less than one
year, there could be additional administrative burden placed on the ISO and less
incentive for market participants to form an active secondary market.

10) WHAT SHOULD THE BASIC UNIT OF AN FTR BE? - The basic unit for bulk power
transactions is 1 MW. The existing proposals all retail this same basic unit for
FTRs.

11) WHAT HAPPENS TO FTRs WHEN INTERFACE CAPABILITY IS REDUCED? - If the
transmission capability on an interface was reduced for some reason (perhaps a
facility outage or a simultaneous transfer limitation) then the amount of
underlying FTRs would not match the interface capability. One approach to
address this issue is to reduce the amount of FTRs prorata to match the
interface capability.

12) SHOULD FTRs BE BI-DIRECTIONAL OR UNIDIRECTIONAL? - In many cases,
transmission paths have different ratings for different directions so different
quantities of FTRs could exist for the different directions. In addition,
different users may require FTRs in different directions. Also, the value of
FTRs in the different directions are expected to vary dramatically. The existing
proposals provide that FTRs be unidirectional rather than bidirectional.

13) WHO GETS THE FTRs FROM NEWLY CONSTRUCTED FACILITIES? -- The existing
proposals provide that those paying for the expansion of the transmission grid
receive FTRs for the incremental transfer capability resulting from that
expansion. If the cost of these new facilities is rolled into the access fee,
the revenue from the sale of FTRs will go to offset access fees. If the cost of
the transmission addition is not rolled into the access fees, the owners of the
transmission addition will receive the auction revenues.

14) SHOULD FTRs BE ASSIGNABLE IN THE SECONDARY MARKET? -- All existing proposals
agree that FTRs should be assignable in the secondary market. One option is to
permit yearly FTRs to be assigned in the secondary market on an hourly basis.

15) SHOULD THE ISO OR SOMEONE ELSE SET UP THE SECONDARY MARKET? - The ISO could
create this secondary market or it could leave it so that the secondary market
will develop on its own. In either case, the ISO will need to design its
protocols so that a secondary market will be accommodated.

ATTACHMENT 1
CONTROVERSIAL ISSUE #1 -- RELATIONSHIP BETWEEN FIRM
TRANSMISSION RIGHTS (FTRs) AND INTER-ZONAL SCHEDULING
PRIORITY

PROPOSALS FOR CONSIDERATION

Approximately one year ago, the FTR section was removed from the overall ISO
tariff filing partially because of a lack of consensus on this issue. Three
options were under consideration. All three of the options would facilitate the
basic goal of an FTR, which is to provide price certainty through the hedging of
transmission congestion costs. The primary differences in how the three
proposals approached scheduling priority are as follows:

Proposal A -- FTRs REQUIRED TO SCHEDULE - FTRs are required to schedule across
an inter-zonal interface. FTRs that are not used in the day-ahead market would
have to be released in the hour-ahead market for others to use. The secondary
market for FTRs would replace the California ISO's system of congestion
management. The secondary market for FTRs would also replace the California
ISO's congestion charges as the market signal for transmission pricing.

Proposal B -- FTRs PROVIDE SCHEDULING PRIORITY - FTRs would not be necessary to
schedule a transaction on the transmission system. FTRs would provide a higher
priority of service in the case where the ISO has to allocate transmission
capability in the absence of economic signals (no adjustment bids or identical
adjustment bids).

PROPOSAL C -- NO RELATION BETWEEN FTRs AND SCHEDULING - FTRs would not be
necessary to schedule a transaction on the transmission system and would not
provide higher-priority service when the ISO has to reduce schedules.

This discussion addresses the day-ahead and hour-ahead markets and does not
address real time. If FTRs are tied to scheduling, a subsequent decision needs
to be made concerning whether FTR holders should also be given priority during
real-time curtailments. IndeGo addressed this issue and decided to use FTRs as a
tiebreaker in real-time with an "if practical" qualifier to recognize that the
dispatchers might not have the time or the tools to be this selective during
real-time curtailments.

POLICY EVALUATION OF THE PROPOSALS:

The impact that each of the above proposals would have on selected California
ISO policy issues is discussed below:

1) IS THE PROPOSAL CONSISTENT WITH THE CALIFORNIA ISO MARKET APPROACH?

Proposal A would replace much of the planned market approach (congestion
management and congestion pricing) with the secondary market for ETRs. Proposals
B and C would not change the California ISO's market approach.

2) DOES THE PROPOSAL PROVIDE FOR THE EFFICIENT PRICING OF TRANSMISSION?

All three proposals provide market signals that can result in the efficient
pricing of transmission. Proposal A uses the secondary market for FTRs as the
market signal. Proposals B and C use congestion charges and the secondary market
for FTRs as the market signals. As the time for a transaction approaches
real-time, transaction times and the lack of a central market may reduce the
efficiency of Proposal A.

3) DOES THE PROPOSAL PROVIDE FOR THE EFFICIENT UTILIZATION OF TRANSMISSION?

Proposal A may present a greater baffler to efficient transmission utilization
than proposals B or C because it includes the requirement that the user first
obtain an FTR. In addition, Proposal A could result in less transmission
availability in the day-ahead market because unused FTRs might not be released
until the hour-ahead market. A user that does not already have an FTR might be
at a disadvantage if they were not able to schedule until the hour-ahead process
begins.

4) IS THE PROPOSAL CONSISTENT WITH FERC'S JULY 30, 1997, ORDER?

Proposal C may not be consistent with FERC's direction that the ISO's proposal
must enable all transmission users to obtain service that is as good as or
superior to the services provided under the Order 888 Pro Forma Tariff (i.e.,
network and point-to-point transmission service). Order 888 service would
provide scheduling priority that is not available under Proposal C.

Proposal A may also not be consistent with FERC's order in that it would allow
participants to withhold transmission capacity from the day-ahead market.

5) DOES THE PROPOSAL RESULT IN EQUITY AMONG ISO TRANSMISSION USERS AND WITH
EXISTING CONTRACTS?

Proposals A and B are compatible with existing contracts because they provide
scheduling priority to the rights holder. Proposal C would not provide
scheduling priority so it would not be consistent with existing contracts.

6) DO ANY OF THE PROPOSALS IMPACT THE COMPLEXITY OF SYSTEM OPERATIONS?

Both Proposals A and B require that the ISO know who has the FTRs in both the
day-ahead and hour-ahead processes. This is not necessary in Proposal C. All
three of the proposals require the ISO to (eventually) know who holds FTRs so
that congestion charges can be distributed to the FTR holders.

7) DO ANY OF THE PROPOSALS RESULT IN SIGNIFICANT MARKET POWER CONCERNS?

The three proposals cause varying degrees of market power concern, however,
significantly more study will be required to understand all potential behaviors.
Under Proposal A, physical rights holders could exercise market power by
hoarding transmission capacity. Divestiture of generation may reduce the
incentive to hoard transmission capacity but transmission owners may still be
able to exercise market power by withholding capacity in order to increase
transmission usage charges. An active secondary market may contribute to market
power by allowing generation owners to acquire transmission capacity.

Under Proposal C, some believe market power could result if generation and
transmission are owned by separate entities and certain system conditions occur.
Generators in an exporting zone may be able to increase their price and limit
generation simultaneously and collect congestion rent without actually causing
transmission congestion. This can only happen under certain market conditions
and the generation owner would have to have access to a considerable amount of
information or collude with other suppliers. In any case, since final market
price would not be affected, there would be no market inefficiencies. The only
outcome would be the division of congestion rents between transmission and
generation owners. Once generation market power has been remedied, then a
secondary market may mitigate transmission market power by allowing rights to
flow to those who value them most. Hoarding, in this instance, would prove
uneconomic due to the foregone revenues from capacity sales.

8) WHAT WAS THE WESTERN REGIONAL CONSENSUS ON THIS ISSUE?

The consensus position was that Proposal B was the preferred solution.

ATTACHMENT 2
CONTROVERSIAL ISSUE #2 -- HOW MANY FTRS SHOULD BE RELEASED
IN THE FIRST AND SECOND YEAR?

PROPOSALS FOR CONSIDERATION

Two proposals were considered before the ISO removed the FTR section from the
tariff.

PROPOSAL A -- 10% FIRST YEAR, 20% SECOND YEAR - The transmission owners believed
that there was a need to phase in FTRs and THAT 10% SHOULD BE RELEASED IN THE
FIRST YEAR, followed by 20% in the second year. The transmission owners were
concerned that a large initial release of FTRs, with their value unproven in the
market, might result in "fire sale" prices, so the transmission owners and their
customers would not receive full value for their transmission capability.

Proposal B -- 100% IN FIRST YEAR -- The marketers and brokers believed that
there was no need to phase in FTRs and that 100% should be released in the first
year.

POLICY EVALUATION OF THE PROPOSALS:

The impact that each of the above proposals would have on selected California
ISO policy issues is discussed below.

1) DOES THE PROPOSAL RESULT IN EQUITY AMONG ISO TRANSMISSION USERS AND WITH
EXISTING CONTRACTS?

Proposal A could result in inequity between ISO transmission users and existing
transmission contracts. With existing contracts, it is possible to obtain fixed
transmission prices. If sufficient FTRs are not available, it will not be
possible for many ISO transmission users to obtain an FTR and the fixed
transmission price that goes along with the FTR. Proposal A might make existing
rights more valuable due to this scarcity.

2) WHAT WAS THE WESTERN REGIONAL CONSENSUS ON THIS ISSUE?

The consensus position was that a "reasonable" amount of FTRs should be made
available. Either Proposal A or Proposal B could be construed as consistent with
the FTRWG consensus depending on which is determined to be "reasonable."

ATTACHMENT 3
CONTROVERSIAL ISSUE #3 -- WHAT SHOULD BE THE FORMAT OF THE
PRIMARY AUCTION?

PROPOSALS FOR CONSIDERATION

This issue can be broken into two sub-issues. The first sub-issue is whether the
auction should be based on as-bid prices or the market-clearing price. The
second sub-issue is whether the auction should be single-round, two-round, or
multi-round. In a two-round auction there would be an initial round of bids that
would not be binding. These initial bids would be used by the bidders to refine
their bids for a subsequent and binding round of bids. Most of the existing
proposals support the concept .of a two-round or multi-round auction rather than
a single-round auction so that issue will not be discussed here.

PROPOSAL B -- MARKET CLEARING PRICE

PROPOSAL A -- AS-BID PRICE

The impact that each of the above proposals would have on selected California
ISO policy issues is discussed below.

POLICY EVALUATION OF THE PROPOSALS:

1) IS THE PROPOSAL CONSISTENT WITH THE CALIFORNIA ISO MARKET APPROACH?

Proposal B appears to be most consistent with the California Market approach in
that the auction processes that have been adopted for other reasons by the ISO
(power exchange, transmission congestion) are based on market clearing prices.

2) WHAT WAS THE WESTERN REGIONAL CONSENSUS ON THIS ISSUE?

There was no position taken on this issue.

ATTACHMENT 4
CONTROVERSIAL ISSUE #4 -- SHOULD TOS AND UDCS BE PROHIBITED
FROM PURCHASING FTRs?

PROPOSALS FOR CONSIDERATION

In the discussions that took place in the development of the TCC proposal, many
non-transmission owning entities felt that it would be necessary to preclude
Utility Distribution Companies (UDCs) and Transmission Owners (TOs) from
purchasing FTRs to address market power concerns. All parties felt that the ISO
should be precluded from purchasing FTRs.

PROPOSAL A -- ONLY ISO IS PRECLUDED FROM PURCHASING FTRs

PROPOSAL B -- ISO, TOs AND UDCs ARE PRECLUDED FROM PURCHASING FTRs

POLICY EVALUATION OF the Proposals:

The impact that each of the above proposals would have on selected California
ISO policy issues is discussed below.

1) DOES THE PROPOSAL RESULT IN EQUITY AMONG ISO TRANSMISSION USERS AND WITH
EXISTING CONTRACTS?

Proposals may create an inequity if selected market participants (UDCs and TOs)
are not allowed to obtain transmission price certainty and possibly scheduling
priority while all the others can. However, this might be offset by other
objectives.

2) WHAT WAS THE WESTERN REGIONAL CONSENSUS ON THIS ISSUE?

The FTRWG did not directly address this issue, although it did adopt Proposal A
as part of its proposal.

ATTACHMENT 5
CONTROVERSIAL Issue #5 -- ARE FTRS USED AS A MEANS TO INTEGRATE EXISTING
CONTRACTS WITH ISO TRANSMISSION

PROPOSALS FOR CONSIDERATION

PROPOSAL A -- TRANSMISSION BOUND BY EXISTING CONTRACTS IS NOT INTEGRATED WITH
ISO TRANSMISSION AND HAS NO RELATIONSHIP WITH FTRS -- This is the present
California ISO approach. ISO transmission is kept separate from transmission
capability bound under existing contracts. In addition, even if the contract
holder becomes an ISO member, the contract holder may opt for pre-existing
contracts to continue to be honored through 2002 or the end of the existing
contract.

PROPOSAL B -- EXISTING CONTRACTS ARE INTEGRATED WITH ISO TRANSMISSION, FTRS
AWARDED TO EXISTING CONTRACT HOLDERS -- This is IndeGo's present approach.
Transmission owners that are IndeGo members and hold existing transmission
contracts to provide service to entities that are not IndeGo members use FTRs as
a means to accommodate the service obligations under these contracts. In IndeGO,
FTRs are issued for all of the contracts of participating IndeGo members. It is
the responsibility of those IndeGo members to make their contract
counter-parties whole.

For the California ISO to adopt this approach, several basic changes may be
necessary to integrate different scheduling timelines and transmission
priorities

Neither of the above proposals address the issue of how to integrate ISO
transmission capability with transmission capability that is owned by entities
that are not ISO participants. For example, neither of these proposals would
provide for the integration (under the ISO protocols) of all the transmission
capability between California and the Northwest.

POLICY EVALUATION OF THE PROPOSALS:

The impact that each of the above proposals would have on selected California
ISO policy issues is discussed below:

1) IS THE PROPOSAL CONSISTENT WITH THE CALIFORNIA ISO MARKET APPROACH?

Proposal A is consistent with the present California ISO's market approach.
Proposal B would require substantial changes in the way that the ISO addresses
existing contracts.

2) DOES THE PROPOSAL PROVIDE FOR THE EFFICIENT UTILIZATION OF TRANSMISSION?

Proposal A presents a greater barrier to efficient transmission utilization than
proposal B. Under Proposal B, more transmission capability would be available to
all the users under the ISO's more economically efficient method of pricing and
scheduling transmission as discussed at the beginning of this white paper. In
addition, Proposal B could provide for better utilization of transmission. Many
of the existing contract holders do not have assignment rights for their
capability, so there is a lack of a secondary market for these rights. With
Proposal B, this unused capability would be available for others to use.

3) DO ANY OF THE PROPOSALS IMPACT THE COMPLEXITY OF SYSTEM OPERATIONS?

Proposal B would require substantial changes to the present ISO protocols
although it IS possible that Proposal B would result in less overall operational
complexity after the implementation period.

4) WHAT WAS THE WESTERN REGIONAL CONSENSUS ON THIS ISSUE?

The FTRWG did not discuss or take a position on this issue.

ATTACHMENT 6
ENTITIES THAT HAVE BEEN REPRESENTED AT WRTA FIRM
TRANSMISSION RIGHTS WORK GROUP MEETINGS

1 Arizona Corporation Commission
2 Arizona Public Service
3 Automated Power Exchange
4 Bonneville Power Administration
5 California Energy Commission
6 California ISO
7 California Public Utilities Commission
8 Destec
9 Enron
10 ESI
11 K.R. Saline and Associates
12 Northwest Power Planning Council
13 Pacific Gas and Electric Company
14 PacifiCorp
15 PECO Energy
16 Platt River Power Authority
17 Public Service of New Mexico
18 Salt River Project
19 San Diego Gas and Electric Company
20 Seattle City Light
21 Southern California Edison
22 Southwest Regional Transmission Association
23 U.S. Bureau of Reclamation
24 Western Area Power Association
25 Western Regional Transmission Association