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---------------------- Forwarded by Elizabeth Sager/HOU/ECT on 11/29/99 11:43 AM --------------------------- "Andy Katz" <AKatz@eei.org< on 11/29/99 10:21:32 AM To: Elizabeth Sager/HOU/ECT@ECT cc: Subject: Fwd: FW: Dow article from this morning This is the article I mentioned. Andrew S. Katz, Senior Attorney Edison Electric Institute 701 Pennsylvania Avenue, N.W. Washington, D.C. 20004 Voice: 202-508-5616 Fax: 202-508-5673 e-mail: akatz@eei.org Received: from semsei01.SouthernEnergy.Com (atles6.southernenergy.com [208.147.220.20]) by mail.eei.org; Mon, 22 Nov 1999 16:59:52 -0500 Received: from atles6.SouthernEnergy.Com (atles6.SouthernEnergy.Com [10.0.1.247]) by semsei01.SouthernEnergy.Com (8.9.3/8.9.3) with ESMTP id QAA09538 for <AKatz@eei.org<; Mon, 22 Nov 1999 16:43:08 -0500 (EST) Received: by atles6.SouthernEnergy.Com with Internet Mail Service (5.5.2232.9) id <XLJ6LYC0<; Mon, 22 Nov 1999 16:43:07 -0500 Message-ID: <7912AEBADCF1D211BDBB0050040E9F50ABABB3@atles7.SouthernEnergy.Com< From: "Edmonds, Sonnet" <sonnet.edmonds@SouthernEnergy.Com< To: "'Andy Katz'" <AKatz@eei.org< Subject: FW: Dow article from this morning Date: Mon, 22 Nov 1999 16:33:47 -0500 MIME-Version: 1.0 X-Mailer: Internet Mail Service (5.5.2232.9) Content-Type: text/plain; charset="iso-8859-1" Have you seen this? Obviously, I ended up speaking to that Dow Jones reporter late last week, at the request of our media relations dept. I was horribly misrepresented. Virtually all of the reporter's questions were about the factual differences between the EEI and WSPP contracts and this is what the article ended up looking like. < -----Original Message----- < From: Brown, Steve < Sent: Monday, November 22, 1999 11:51 AM < To: Edmonds, Sonnet < Subject: FW: Dow article from this morning < < You are mentioned in this Dow Article. < < -----Original Message----- < From: Markham, Robert F. < Sent: Monday, November 22, 1999 11:28 AM < To: Brown, Steve; Soto, Oscar < Subject: FW: Dow article from this morning < < < < =DJ Power Points: EEI Contract - Will This Dog Hunt < Nov 19 15:20 - CM - Dow Jones Capital Markets Report < < < By Mark Golden < A Dow Jones Newswires Column < < NEW YORK (Dow Jones)--"Et tu, Sonnet?" < The Edison Electric Institute unveiled Wednesday a standardized master < agreement for trading power, but there's already a standard contract - the < one written by the Western Systems Power Pool. < There are several ways to characterize this battle: East versus West; < power marketers versus utilities; and, even, Southern Co. versus Southern < Co. A power struggle has begun, despite the fact that most traders, < preschedulers and trading managers aren't even aware of the new contract. < Southern Co. (SO) Vice President Bobby Campo has been a leader in WSPP < since the organization's inception and has been chairman of its contract < committee for four years. Yet Southern Co. Energy Marketing's chief < counsel, Sonnet Edmonds, is a leader in the rival-contract faction. < Will EEI, along with its comrade, the National Energy Marketers < Association, manage to dethrone the WSPP contract or crash? WSPP's raison < d'etre is to manage and promote use of its contract, which is traded < extensively in the West and has gained proponents in the East. < "I'm not real excited about it right now," Campo said of the new < contract. "The EEI contract is being done by contract people and lawyers. < We - operators and power marketers - worked on our contract for years < before we brought in the lawyers. It (the new contract) may die from a < lack < of interest from participants, but EEI has the ability to keep it alive." < It isn't clear if the big power marketing companies will get the ball < rolling by asking counterparties to switch to the EEI contract. Edmonds < hopes that Southern Co. will do so. < "Management hasn't given the official word yet, but we participated in < its development, so I imagine we'll use it at some point," she said. < Enron Corp.'s (ENE) general counsel also worked on the EEI contract, but < the company hasn't made a decision to actually use it. < Entergy Corp.'s (ETR) general counsel, Christopher Bernard, led the < effort to develop the new contract as head of NEM's standardized contract < committee. But Entergy's Jim Kenney is chairman of WSPP's executive < committee. Entergy's power trading managers, meanwhile, haven't even read < the new contract yet. < Duke Power Co. (DUK), an NEM member, is looking at it, a spokesman said. < Enron and Southern Co. aren't NEM members, though they serve on its < contract committee. < Several sources said American Electric Power (AEP) has agreed to be the < guinea pig, and plans to switch to the EEI contract with counterparties on < eastern U.S. trades. A spokesman for the utility couldn't confirm or deny < that rumor because Paul Addis, president of AEP Energy Services, has < imposed a vow of silence on AEP's traders. < There are elements of the EEI contract that power marketers may like. < One < innovation is a new product called "Firm (No Force Majeure)," which < requires the payment of liquidated damages for failure to deliver - no < excuses, no force majeure, just send a check. < The new contract also has two other firm products. "Firm (Liquidated < Damages)" is closest to the WSPP firm product, but it defines force < majeure < more strictly than WSPP. "Firm (LD-System Reliability)" explicitly allows < a < selling utility to curtail deliveries without paying liquidated damages if < necessary to maintain native load. Of particular interest to traders of < eastern U.S. electricity is the fact that the EEI contract defines what an < "into" product is. < WSPP has debated the introduction of such products, but in the end has < tried to come up with a single, agreed-upon product for trading. < "EEI has created a lot of different types of firm products, but that can < create problems. Many people have said 'no, we want one firm product'," < said WSPP's counsel, Michael Small, of Washington, D.C., law firm Wright < and Talisman. < So why didn't the EEI group just work with WSPP to get changes made to < the existing standard? Too much bureaucracy, according to Southern's < Edmonds. < "Changes to the WSPP contract require approval from 90% of the members, < after working through the operations committee and the executive < committee. < Then the changes have to be filed at Federal Energy Regulatory < Commission," < Edmonds said. < Coincidentally, WSPP's executive committee is meeting Friday in San < Diego < to discuss what changes are needed in the definition of its firm product. < Western utilities are pushing hard for "firm" to mean backed up by < reserves < of generating assets or previously purchased power. In other words, some < utilities want to eliminate short positions from power markets. < At least one power marketing company, which didn't want to be named, < will < switch to the EEI contract if that change gets made to WSPP. < For the EEI contract to fly, not only will the lawyers at the big < trading < companies need to make it their companies' standard, but traders will have < to convince utilities to abandon most, if not all, force majeure claims. < Many municipal utilities and rural electric cooperatives are forbidden to < do so by state regulations. < For traders, though, the biggest adjustment to make if the EEI contract < does take off will be more social than professional. The semi-annual < meeting of the WSPP's operations committee is as much fun as any blatant < boondoggle should be. The serious work of a handful of committee members < is < a small hook on which hangs the revelry of hundreds of power marketers, < brokers and utility staffers. As it stands, non-committee members must < have < a hard time convincing bosses that their presence is necessary at the < meeting. < How on earth will traders justify going if the WSPP contract is no < longer < used? Can EEI throw a good party? And how will the Gucci-loafered EEI < executives from Washington handle $1,000 dares to go naked in a bar? < Such are the questions now vexing America's electric utilities. < -By Mark Golden; Dow Jones Newswires; 201-938-4604; < mark.golden@dowjones.com < < (END) Dow Jones Newswires 11-19-99 < 1520EST
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