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---------------------- Forwarded by Kay Mann/Corp/Enron on 09/19/2000 05:05
PM --------------------------- "Duncan, Allyson" <aduncan@kilstock.com< on 09/19/2000 05:01:00 PM To: "'Reagan.rorschach@enron.com'" <Reagan.rorschach@enron.com<, "'Mann Kay'" <Kay.Mann@enron.com<, "'Chapman Tom'" <tom.chapman@enron.com<, "'Keenan Jeffrey'" <Jeffrey.M.Keenan@enron.com<, "'Kroll Heather'" <Heather.Kroll@enron.com< cc: "Fine, Jonathan" <JFine@kilstock.com< Subject: FW: Enron This is helpful to know, and we all need to discuss. -----Original Message----- From: Gisele Rankin [mailto:Gisele.Rankin@ncmail.net] Sent: Tuesday, September 19, 2000 5:42 PM To: Allyson Duncan Subject: Enron Importance: High I got your message earlier about the order on the extension of time, but didn't recall that the order dealt with the due date for rebuttal testimony. Since you said you were going to call Sammy Kirby anyway, I didn't call back. We had a meeting today to try to finalize our testimony. We plan to let you see it before we file it. To start with, we do not want to reveal any confidential information and secondly, Enron may be able to offer input into the solutions for our concerns that would obviate any official disagreements. We currently have two alternative recommendations in our testimony. One gives Enron (EDC) a certificate conditioned on it filing a signed PPA and evidence showing it has a long-term right to have its plant on the site (such as a lease with Rocky Mount). The other alternative doesn't give you the certificate until you file those things, we review them, etc.. We currently are favoring the first one and I'm sure Enron would prefer the first one. The control of the site is a little bit problematic. In the application, you say Enron has an option on the land. In a data response, you say you intend to give it (or sell it) to Rocky Mt. and that it will own the land. However, no arrangements have apparently been made for Enron to have a long-term right to keep the plant on the site. We have no objection to Rocky Mt. owning the land. I hope that is clear. But we do have a problem with giving a certificate to Enron if Enron has no long term right to be on the land. (Control of the site has always been one of the cornerstones of the requirements. It is hard to award a certificate for the construction of a plant on the basis of a definite need for the capacity if the owner of the land could require the plant owner to dismantle the thing the next year.) This is something that could be met later - after the order had gone out, if Enron doesn't have a problem with that. I can't imagine Enron being willing to invest much money in the plant before it has a long term lease or other arrangement. It may be enough for your witness to state that it won't give up the option or the ownership of the land unless and until it has a long-term lease (or whatever). Another issue is the status of EDC. Your amendment says you're going to create an LLC. EDC needs to exist before the certificate is awarded because obviously we can't award a certificate to a nonexistent person. You don't need to file anything necessarily, but we need a showing before the hearing that EDC has been or very shortly will be created. We also need some assurance that Enron will capitalize EDC properly, which I could get by asking your witness a couple of questions, if that is the easiest way to do it. (This is not a big deal, but necessary to dot all the i's and cross all the t's.) Bob Hinton has been trading calls with Kay Mann (spelling?) about the creation of the LLC and maybe some other things. I wanted you to know about these issues also, however, to keep you in the loop and also because you may can get things done a little faster! The only other issue is a rather complicated one. Under the terms of the PPA as currently drafted, Enron has until 10/31/01 to complete construction, unless specifically excused. (This is in section 2.3.) If Enron hasn't completed construction and declared Commercial Operation before 10/31/01 (as extended due to excusable delays), then Enron has to buy rights in Vepco's control area to capacity equal to the contract capacity within 30 days. If Enron doesn't fulfill that obligation, Vepco, in its sole discretion, can terminate the Agreement. Because Enron filed this application on the basis of the Vepco contract and also because we do not have any guidelines on merchant plants yet, we are using the contract (even though it is so short term) to justify the need and hence the certificate. (Otherwise, I'm afraid we go off into a quagmire in terms of how to define a definite need in this brave new world. Obviously, Enron doesn't have time to wait until the generic issues are resolved.) Because the contract can be terminated however we are uncomfortable with an open-ended certificate. By rule, QF contracts have to be renewed (rejustified) after five years if construction (isn't begun or completed - I don't remember which). We've taken the same position by analogy except for a shorter amount of time with other certificates, although I don't think we've officially had to take the position. (We told the Power Agency its certificate for this site was too old, for example.) We are leaning toward taking the position that if the plant hasn't achieved commercial operation by November 30th (to take into account the extra 30 days Vepco gives Enron to get rights to capacity), unless excused, then the certificate expires and Enron will have to rejustify it. We've discussed tying it to "significant construction" having occurred, but anything other than commercial operation is too subjective. We've also discussed having the certificate become null and void, but thought that sounded too harsh and was perhaps unfair if construction was well under way. You may remember the LG&E-Westmoreland Partners case, in which its first plant (ROVA I) gave its QF host to a sister plant, with the first plant becoming an EWG (and not a QF). It basically had to rejustify its certificate and the Commission reissued the certificate. The construction of that plant was well along at the time. I hope to have a copy of our testimony to you early Thursday. I know it can take awhile to get through all the channels at Enron, but that's probably as early as I can do it. (I'll try for Wednesday p.m., but I think that is too optimistic.) We'd prefer to work things out or at least reduce the degree and/or extent of any disagreements. Please let me know what Enron can or wants to do on the PPA, the option/lease, and the creation of EDC. Supplemental testimony prefiled or done from the stand would work on the latter two as would cross-examination. For the first one, we need a signed contract before the order goes out at the VERY latest. It would be nice to have it before the hearing..
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