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Enron Mail |
Tetco held a 637 "settlement" conference last Fiday to discuss their latest
proposal dated March 8th. Their new proposal involved the institution of a weekly cash-out mechanism along with a daily variance penalty based on overall system position. In brief: PENALTIES Stage One--on any day where a shipper's imbalance in greater than 7% in any zone, the "daily imbalance charge" would be 2x the maximum PAL rate for the entire balance (not just the piece that's over 7%) in each zone. Stage Two--on any day where either the Market Area or Access Area is out of balance by greater than 4%, Tetco would have the discretion to issue a Stage Two notice, establishing a tolerance level (which could be 0, subject to Tetco's sole discretion) that all shippers would have not less than 12 hours' notice with which to comply. Under Tetco's propsal, any volumes in excess of the level stated in the notice would be assessed a "daily imbalnce charge" equal to 4x the maximum PAL rate. In a Stage 2 situation, if your imbalance is in the opposite direction of the pipe, no penalty would be charged (but you'd still cash-out) CASH-OUT Weekly monetization of cash-out positions based on a Sunday to Saturday week (Tetco needs to revise this so that the weeks are managed depending on how the calendar falls so that they minimize problems like a 2-day week). Monetization by Zone in 2 tiers 0-4% to be cashed-out at the average of each day's mid point price for the weekly period 4%+ ENTIRE IMBALANCE cashed-out at the weekly highest/lowest common price for the week This is a significant change since under the current tariff, shippers pay a staggered fee, such that volumes with in the first tier are charged that tier's price, then overflow into the next tier is charged at that tier's price, etc. Now, the entire amount would be assessed the higher price. NETTING & TRADING would be limited to the week in which the imbalance was incurred and would be limited by zone (contrary to Order 637) Any netting or trading would not decrease the daily imbalance charge (the positions would be frozen each day) but could decrease the cash-out exposure (completely contrary to 637 which indicates that netting & trading should be a tool used to limit penalties) Results: it would be possible, in fact likely, that a shipper would pay both an imbalance penalty and a cash-out fee on the same volume (contrary to Order 637) under the Zero tolerance Stage Two scenario, Tetco would have complete discretion to set the level (not itself a bad thing, they need to be able to control their system)--they've indicated that they'd set a 2% floor for penalties but that doesn't really solve the problem. not only would the cash-out mechanism be more difficult to administer, it could significantly increase our cash-out liability and subject us to penalties that do not exist today. Dynegy, PGC and Indicated Shippers indicated to Tetco that we don't see any progress towards settlement, or even a foundation to go forward on and that we're ready at this point to go to the Commission for a decision on their 637 filing as a whole. Several of the LDC's stated that they want to continue to pursue settlement so we agreed to submit a status report to Staff indicating that we'll continue to talk, setting an April 30th deadline. At that point, I expected that Tetco would attempt to establish an aggressive negotiation schedule in an effort to make some progress--instead all they did was agree to my request to provide a comparison of the different offers and scheduled a follow up meeting for April 10th. Tetco indicated that they don't plan to make another offer and would not agree to entertain counter-offers. At this point, I doubt that we'll make any significant progress and believe that this issue will end up being litigated, or at least submitted to the FERC for a decision. Based strictly on the letter of the Order (or at least our interpretation of it), I think we have Please let me know if you have any questions / concerns / comments. Thanks, Suzanne x54880
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