FW: BECO Presentation

Gentlemen -

Attached below is a presentation on BECO T&D and Standard Offer/Default Service prepared by Andrew Kosnaski in our URM group. Please let me know if you find this info useful as we are in the process of reviewing each major utility in the East. We will have regional oversight with individuals accountable for specific regions/utilities. To the extent the wholesale group can use this expertise, please feel free.

Thanks,
Rogers

-----Original Message-----
From: Kosnaski, Andrew
Sent: Thursday, August 23, 2001 9:00 AM
To: Herndon, Rogers
Subject: BECO Presentation

Gentlemen :

As discussed, the following are the 5 biggest risks and curve opportunities for BECO:

RISKS

Lower power price results in higher CTC beyond 2004 (can be hedged using existing short positions, URM actively pursuing)
Dramatic price increases causes huge congestion losses on commodity costs
Dramatic price increases cause subsidization of some customer classes by others (i.e. large C&I (Enron))
Lower than expected load growth results in higher future CTC/Delivery charges
SO deferrals lead to implemntation of 5 mil adder to delivery rates

OPPORTUNITIES

Lower ROR in first unbundled delivery rate case could reduce delivery rates by as much as $1.50 - $2.00/MWh in delivery rates
Lower than modeled capital additions cause $1.00 - $3.00 decrease in expected delivery rates
Merger synergies reflected in 2005 rate case, result in reduction in delivery rates to reflect lower O&M and operating costs
Arbitrage between regulated and retail gen rates to reflect congestion costs in 2004 and beyond (locational marginal prices)
Load growth can be higher than expected resulting in lower than expected delivery rates

I am having an Associate in our group work on a model that will allow us to run more accurate sensitivity analyses and will keep you all informed of the results. If you have any questions, please do not hesitate to contact me,

AK