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Enron Mail |
All:
I haven't heard from Woody yet, but I thought I'd chime in to add something to John's excellent summary of the Maine SOS potential deal. Perhaps the biggest legal risk is that Enron would be subjected to Maine rules and regulations on SOS, which could be changed at any time. During phone conversations over the last 2 weeks, we explained to Maine PUC staff that, in a wholesale contract, we usually do not retain this risk. We explained the clauses in the UI deal (anonymously, of course) that (1) prohibit UI from advocating change that would adversely affect us and (2) if such change occurs anyway, requires UI to negotiate w/ us to restore the original economic bargain. The staff indicated a willingness to have the PUC issue its order awarding the SOS contract also say that the PUC would not change the rules for the term of that award. But we don't know how they would do that (we might see a draft early this week), and that still doesn't really remove the regulatory change risk -- only a statute could do that, and they don't appear to have much of an appetite for that. On the damages issues, the contract w/ the T&D company gives Enron no comfort at all. The T&D company has virtually no liability to Enron, nor does anyone else. However, under SOS Rule 301, if Enron defaults, the Maine PUC will order the T&D company how to handle finding replacement service and Enron would be exposed to the full replacement costs, in spite of the cap on the Enron Corp. guarantee. Effectively, this means that Enron Corp.'s liability is capped, but the Enron entity that provides the SOS can potentially be sued by the Maine Attorney General for additional amounts needed to pay for the additional costs -- or the PUC can approve a rate increase from customers. (Sounds like this would be a political decision, eventually.) The difference between this exposure and how we usually handle this issue is that our contract usually sets parameters on calculating replacement costs and requires commercially reasonable behavior, standards for which are widely accepted and ultimately interpreted by commercial arbitrators in a neutral forum. In the Maine situation, if we want to dispute the amounts claimed, we'd have to argue about whether commercially reasonable behavior was even required, and we'd be doing that in litigation in a Maine court facing the Maine Attorney General. Please let me know if you'd like any other info or wish to discuss further. Regards, Janice EB3861 Assistant General Counsel, Enron North America Corp. 713-853-1794 (Fax: 713-646-4842) John Llodra@ENRON 11/27/2000 09:23 AM To: Janet R Dietrich/HOU/ECT@ECT cc: George Wood/Corp/Enron@Enron, Janice R Moore/HOU/ECT@ECT, Jeffery Ader/HOU/ECT@ECT, Jim Meyn/NA/Enron@Enron, Pearce W Hammond/Corp/Enron@ENRON Subject: Summary of Maine SOS transaction Janet: As promised, here is a brief synopsis of the Maine SOS transaction terms and issues. I am in the office all day and free to discuss if you like. Woody is actually on the way to Houston and is available after about noon central time. Janice Moore (x31794) has worked on the many legal issues and can elaborate more fully on the issues there, including the lack of a real contract counterparty. Jim Meyn and Pearce Hammond in structuring can give you more details on the load stats, etc in each of the classes for each utility. I will also forward some old email correspondence I have which discusses the various legal issues and bidder qualification requirements, etc. Please feel free to call to discuss. (978-449-9936). Regards, John
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