Message-ID: <12952060.1075855014264.JavaMail.evans@thyme>
Date: Tue, 13 Feb 2001 20:50:00 -0800 (PST)
From: jeffery.fawcett@enron.com
To: shelley.corman@enron.com
Subject: Principles for Generator Discussion
Cc: susan.scott@enron.com
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Shelley,
I'm glad we made the decision to participate in today's drafting session.  =
There were only nine of us involved, with Ed Ross, Skip Simmons and Craig C=
hancellor representing the generators, while Byron White, Georgia Carter an=
d myself were there to represent the pipelines.  The others were with the A=
lliance.  Ed was his usual self.  He was confidently making the good econom=
ic case why the pipelines should consider the generator's position and how/=
why the FERC would likely side with them.  Craig tried to frame it commerci=
ally, and Skip played peacemaker.  Byron and I played a little "good cop/ba=
d cop" on behalf of the pipes, with Byron being the bad cop. =20

Anyway, sum and substance, I think we'll be more pleased with the next draf=
t of this document than what was submitted to us recently.   The first sent=
ence was replaced with a more sweeping statement of intent and mission of t=
he parties that focused on the provisioning of the service being subject to=
 physical operating considerations.  There emerged a realization that maybe=
 two products are being contemplated here:  (1) a product that blocks out a=
 period of time for uniform deliveries (say, 8 hours), and (2) a product th=
at basically provides the generator an option on when to take the agreed up=
on block of capacity.  It was agreed that the first product is likely to be=
 less valuable than the second, and priced accordingly.  Byron and I argued=
 that segmenting hourly rights should not be mandated, and in fact, may be =
physically impossible along some locations of the pipeline.  The generators=
 originally intended segmenting as possibly relating to how the NURF rights=
 were carved up by hour, (ex. an 8 hr. block of 5,000/d could be repackaged=
 as two 8 hr. blocks of 2,500/d).  I'm not sure whether we got consensus th=
ere or not -- we'll have to see the next draft.

The big ticket items (nos. 8, 9) got the most press.  I was troubled by the=
 generators' interpretation of both.  In the case of no. 8, the generators =
wanted to predesignate a mechanism whereby an existing customer holding a f=
irm service (whether FT, NNS or storage) could, pursuant to the conversion =
formula, remarket their original firm service as NURF.  The generators were=
 looking at this provision as "throwing a bone" to existing customers who m=
ight want to compete with the pipeline for NURF service using capacity (ex.=
 seasonal) that may not be fully utilized.  Obviously, the predetermined co=
nversion factor was a huge problem for the pipelines, as well as the whole =
notion of trying to fit a round peg into a square hole (ie. two or more dif=
ferent product types).  We pointed out the services were all different, and=
 in fact, any combination of those services, conceivably, could be repackag=
ed under today's rules and sold as a proxy for NURF.  I believe we were suc=
cessful in taming that language down substantially.  However, be on the loo=
kout for the next draft.

Finally, with respect to no. 9, where the generators want receipts consider=
ed rateable with deliveries for purposes of NURF, the generators had an int=
ersting slant.  Essentially, Ed was saying that he didn't want the pipeline=
s to hold the generators hostage on rates for NURF if the pipelines were th=
e only ones who could offer NURF.  By requiring the pipelines to consider r=
ateable receipts as meeting the NURF criteria, then Ed said the generators =
would receive the benefits of a competitive marketplace for "NURF-like" ser=
vice.  Skip pointed out that taking gas out of storage at Westar in West Te=
xas and using it as an hour by hour offset for deliveries to a power plant =
located at the California border was probably unworkable.  However, he also=
 posed the hypothet that if SoCalGas were to provide the same storage servi=
ce at the California border and those deliveries into SoCalGas could be adj=
usted to take into account the deliveries to the power plant (a sort of div=
ersion of gas theory), then the pipeline should be operationally indifferen=
t to whether it was providing NURF service or a 3rd party was providing a N=
URF-like service.  They just want others to have the ability to compete wit=
h the pipeline.

Of course, the pipeline argued that operationally those products may not be=
 the same.  Moreover, accepting such a nomination from SoCalGas could conce=
ivably knock off other uses of the capacity the pipeline was counting on (I=
T, LFT, etc.) as an offset which gave rise to the lower rate for the pipeli=
ne's NURF service.  Skip scratched out a more tame version of no. 9, and Ed=
 agreed to consider it.  Be on the lookout for what they come up with.

Overall, as I said, I'm glad I was there, as well as the other pipeline rep=
resentatives.  I hope that we were successful in getting the generators bac=
k on track here.  I'll be interested in seeing how much of our discussion t=
oday is embodied in the next generator draft.

I told the group they were in trouble on Thursday, as we were sending in th=
e "A" team.  Good luck and call if you have any questions.=20






From:=09Shelley Corman/ENRON@enronXgate on 02/13/2001 10:59 AM
To:=09Mary Kay Miller/ET&S/Enron@ENRON, Robert Kilmer/ENRON@enronXgate, Dre=
w Fossum/ET&S/Enron@ENRON, Dave Neubauer/ET&S/Enron@ENRON, Danny McCarty/ET=
&S/Enron@Enron, Steven Harris/ET&S/Enron@ENRON, Susan Scott/ET&S/Enron@ENRO=
N, Bob Burleson/ET&S/Enron@ENRON
cc:=09Jeffery Fawcett/ET&S/Enron@ENRON=20

Subject:=09Principles for Generator Discussion


This week there are two scheduled pipeline/generator sessions.  Today, the =
generators will be meeting with a small group of pipelines in a drafting se=
ssion.  On Thursday, the third meeting of the larger pipeline/generator gro=
up is scheduled.=20

Last Friday, I faxed you a copy of the latest strawman for a NURF service w=
ith my comments. I noted that the strawman is moving in the wrong direction=
.  I decided to formalize these thoughts into our own set of principles.

Jeff Fawcett will be representing our viewpoint at the drafting session tod=
ay & I will cover the dialogue on Thursday.  Let me know if you have any ot=
her feedback.  Of course, anyone else is welcome to attend these meetings w=
ith Jeff or I.

 =20


