Akbar Jazayeri Vice President, Revenue and Tariffs September 5, 2006 ADVICE 2039-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Request for an Amendment to SCE s AB 57 Procurement Plan- Clearing Firms PURPOSE This advice filing requests that the California Public Utilities Commission (Commission) approve an amendment to s (SCE) AB 57 Procurement Plan 1 to add two NYMEX clearing firms to its list of authorized brokerages/exchanges. BACKGROUND In the 2004 Short-Term Procurement Plan, SCE stated that it anticipates using different methods to execute transactions depending on product requirements and prevailing market conditions. SCE proposes to select appropriate method(s) depending on the transaction contemplated to ensure that transaction prices are competitive. If SCE determines that the use of additional transaction methods and/or brokerages/exchanges would be beneficial during the term of the procurement plan, SCE will propose such methods via the advice letter process. 2 SCE s 2004 STPP contained an approved list of electronic and other transparent exchanges that the Commission approved on December 18, 2003 in D.03-12-062. Advice Letter 2004-E 1 SCE filed its 2004 Short-Term Procurement Plan (referred to at times as the 2004 STPP, or 2004 AB57 PP ) on May 15, 2003, and it was approved by the Commission in D.03-12-062, as modified by D.04-12-048. SCE s 2004 STPP has been further updated and amended via the following Commission-approved advice letters: Advice Letter 1770-E-B (submitted December 22, 2004)(revising capacity position limits and capacity ratable rates for 2005-2014), Advice Letter 1770-E-C (submitted January 20, 2005)(updating capacity position limits and capacity ratable rates for 2005-2008), Advice Letter 1878-E (submitted March 25, 2005)(providing other revisions in compliance with D.04-12-048), Advice Letter 1989-E (submitted April 7, 2006)(requesting authorization to deviate from natural gas rate-of-transaction limits and limited waiver of the risk screen), and Advice Letter 2004-E (submitted May 23, 2006)(requesting additional authorized brokerages). 2 2004 STPP at 115. P.O. Box 800 2244 Walnut Grove Ave. Rosemead, California 91770 (626) 302-3630 Fax (626) 302-4829
- 2 - requesting additional authorized brokerages was approved by the Commission with an effective date of June 19, 2006. JUSTIFICATION In order to execute and settle gas products traded on the NYMEX exchange, SCE employs a clearing firm. Clearing firms are members of an exchange such as NYMEX and guarantee the financial commitments of the customers that clear through them. Unlike brokers, clearing firms assume the financial risk of a transaction, ensure delivery and settle transactions. The addition of two clearing firms to SCE s authorized list enables SCE to offset potential concentration risk that occurs if one or more clearing firms are unable or unwilling to execute and/or settle NYMEX transactions on SCE s behalf. To mitigate this risk, SCE requests Commission approval to add two clearing firms to its authorized list, Calyon Financial Inc. and ABN AMRO Global Energy Futures. These two firms were selected in a competitive process from a group of nine clearing firms based on their transaction fee schedules and their commercial, credit, and legal terms and conditions. Executing enabling agreements with these two new clearing firms will not obligate SCE to use them but instead will provide an option to do so. The decision to use an enabled clearing firm will be made on a transaction-by-transaction basis. In each case, SCE will consider transaction costs and execution ease, other non-transaction specific factors, and any possible contract disputes SCE may have had with the firms. REQUEST FOR COMMISSION APPROVAL Additions to The List of Brokerages SCE requests that the Commission approve the addition of the following clearing firms to the list of approved brokerages/exchanges in SCE s AB57 Procurement Plan that may be used by SCE: ABN AMRO Global Energy Futures Calyon Financial Inc. Updated Brokerage and Clearing Firm List The following table provides an updated and complete list of brokerages and exchanges (and their associated clearing firms) that SCE will be using for all Commission-approved transactions upon the Commission s approval of this Advice Letter and incorporation into SCE s AB57 Procurement Plan.
- 3 - PLATFORM Table of Brokerages and Exchanges PLATFORM SPONSORS DATE LAUNCHED Brokerages Amerex (voice broker) Private Investors 1991 ICAP Energy LLC (acquired APB Energy) (voice broker) Automated Power Exchange CHOICE! Energy LP (voice broker) Intercontinental Exchange (ICE) Tullett Liberty (acquired Natsource) (voice broker) Bloomberg Power Match (Bloomberg discontinued Power Match) Prebon Energy (voice broker) Spectron (voice broker) Intercapital Corporation (London Exchange) 1994 PRODUCTS TRADED AND/OR INFORMATION PROVIDED Day Ahead, Balance of Month, Prompt Month, quarterly, calendar: Blocks Day Ahead, Balance of Month, Prompt Month, quarterly, calendar: Blocks Private Investors 1998 Retail Demand Private Investors 1993 Brokers, Energy Companies Partners include: Tullett & Tokyo Liberty, Inc., Tokyo Tanshi Co., Ltd, Pareto AS, Mitsubishi International Corporation, Hafslund Invest AS 2000 1994 Bloomberg 1998 Subsidiary of Prebon Yamane Gas 1992; Electricity 1995 Private Investors 1988 Gas: Day Ahead, Swing Monthly, Seasons, Calendar, Physical, Financial, Options Intra-Day Hourly, Day Ahead, Monthly, Yearly Day Ahead, Monthly, Quarterly, Calendar; Physical, Financial, Options Intra-Day Hourly, Day Ahead, Monthly, Yearly Day Ahead, Monthly, Quarterly, Calendar; Physical, Financial, Options Natural Gas: Physical and Financial
- 4 - TFS Energy (voice broker) Table of Brokerages and Exchanges Subsideiary of TFSbrokrs 1995 Landmark (voice broker) Private Investors 2002 Castlebridge Partners LLC (voice broker) American Energy Risk Management (voice broker) Limited Day Ahead, Monthly, Quarterly, Calendar; Physical, Financial, Options Electricity: Physical and Financial Natural Gas: Physical and Financial Private Investors 1997 Weather triggered options Private Investors 1991 GFI Brokers LLC Private Investors 2000 Saddleback Energy Private Investors 2002 IVG Energy, LTD (voice broker) Private Investors 2004 Natural Gas: Physical and Financial Natural Gas: Physical and Financial Natural Gas: Physical and Financial Electricity: Physical and Financial Natural Gas: Physical and Financial Exchanges and Their Associated Clearing Firms NYMEX 3 (Member clearing firms listed below) 1872 see below Citigroup Global Markets, Inc. (formerly Solomon Smith Barney) n.a. 1892 NYMEX exchange gas products (e.g. futures, swaps, options) Prudential 4 n.a. 1880 n.a. NYMEX exchange gas n.a. 1824 products (e.g. futures, swaps, options) NYMEX exchange gas Calyon Financial Inc. n.a. 1987 products (e.g. futures, swaps, options) ABN AMRO Global Energy Futures 3 NYMEX and its associated clearing firms were previously listed together with the approved brokers in SCE s 2004 STPP. This updated table lists NYMEX and its associated clearing firms separately. 4 On July 1, 2003, Prudential Financial, Inc. and the Wachovia Corporation joined forces to combine their retail securities brokerage and clearing businesses within Wachovia Securities, LLC.
- 5 - REQUESTED APPROVAL SCE proposes to amend its AB 57 Procurement Plan to add the clearing firms specified above, and respectfully requests that the Commission approve the above requested amendment. EFFECTIVE DATE This advice filing will become effective upon review and approval by the Commission. NOTICE Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received by the Energy Division and SCE no later than 20 days after the date of this advice filing. Protests should be mailed to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue, Room 4002 San Francisco, California 94102 Facsimile: (415) 703-2200 E-mail: jjr@cpuc.ca.gov and jnj@cpuc.ca.gov Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address above). In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of: Akbar Jazayeri Vice President, Revenue and Tariffs 2244 Walnut Grove Avenue Rosemead, California 91770 Facsimile: (626) 302-4829 E-mail: AdviceTariffManager@sce.com Bruce Foster Senior Vice President of Regulatory Operations c/o Karyn Gansecki 601 Van Ness Avenue, Suite 2040 San Francisco, California 94102 Facsimile: (415) 673-1116 E-mail: Karyn.Gansecki@sce.com
- 6 - There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and shall be submitted expeditiously. In accordance with Section III, Paragraph G, of General Order No. 96-A, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-A and R.04-04-003 service lists. Address change requests to the GO 96-A service list should be directed to (626) 302-4039 or by electronic mail at AdviceTariffManager@sce.com. For changes to all other service lists, please contact the Commission s Process office at (415) 703-2021 or by electronic mail at Process_Office@cpuc.ca.gov. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the advice filing open for public inspection at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at http://www.sce.com/aboutsce/regulatory/adviceletters. For questions, please contact Dhaval Dagli at (626) 302-4840 or by electronic mail at: Dhaval.Dagli@sce.com. AJ:mm:dd Enclosures Akbar Jazayeri
CALIFORNIA PUBLIC UTILITIES COMMISSION ADVICE LETTER FILING SUMMARY ENERGY UTILITY MUST BE COMPLETED BY UTILITY (Attach additional pages as needed) Company name/cpuc Utility No.: (U 338-E) Utility type: Contact Person: James Yee! ELC " GAS Phone #: (626) 302-2509 " PLC " HEAT " WATER E-mail: James.Yee@sce.com EXPLANATION OF UTILITY TYPE ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water (Date Filed/ Received Stamp by CPUC) Advice Letter (AL) #: 2039-E Subject of AL: Request for an Amendment to SCE s AB 57 Procurement Plan- Clearing Firms Keywords (choose from CPUC listing): Procurement AL filing type: " Monthly " Quarterly " Annual! One-Time " Other If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #: Does AL replace a withdrawn or rejected AL? If so, identify the prior AL: Summarize differences between the AL and the prior withdrawn or rejected AL 1 : Resolution Required? " Yes! No Requested effective date: No. of tariff sheets: -0- Estimated system annual revenue effect: (%): Estimated system average rate effect (%): When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting). Tariff schedules affected: None Service affected and changes proposed 1 : Pending advice letters that revise the same tariff sheets: 1 Discuss in AL if more space is needed.
Protests and all other correspondence regarding this AL are due no later than 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Ave., San Francisco, CA 94102 jjr@cpuc.ca.gov and jnj@cpuc.ca.gov Akbar Jazayeri Vice President Revenue and Tariffs 2244 Walnut Grove Avenue Rosemead, California 91770 Facsimile: (626) 302-4829 E-mail: AdviceTariffManager@sce.com Bruce Foster Senior Vice President of Regulatory Operations c/o Karyn Gansecki 601 Van Ness Avenue, Suite 2040 San Francisco, California 94102 Facsimile: (415) 673-1116 E-mail: Karyn.Gansecki@sce.com