Re: Draft- Operating Agreement

Colleen, thank you so much for your very prompt attention to this. I
definitely had the wrong version of the agreement.
Jeff confirmed by voice mail this morning that even though we already
included the 5.4 language in the draft we sent him back in March, he does
find it objectionable and will want to modify it, so he will be very
interested in seeing your suggested language too.

Please send your attachment "CalpineO&M 10-18-00 edits to draft03-20-00".

Again, thank you so much for your help with this. (Calpine has finally woken
up and realized they want this in place Nov. 1...)
I will let you know how negotiations are shaping up.

Colleen Raker
10/18/2000 07:35 PM
To: Susan Scott/ET&S/Enron@ENRON
cc:

Subject: Draft- Operating Agreement

Attached below is Jeff Fawsett's 3/22/00 note to Calpine with TW's 3/20/00
draft of the Operating Agreement . What changes if any did Calpine require
to this draft? Please note that Section 5.4 of the attached 3/20/00 draft is
substantively identical to my further-revised Section 5.4 (with subsections A
and B) that I forwarded to you a few days after Jeff's note to Calpine.

From our meeting this morning I understand that Jeff appears adverse to
Transwestern's claiming zero financial responsibility for damages to
Calpine's Measurement and Control Facilities that result from TW's O&M
Services. Consequently, I made some modifications to Articles 4 and 5 of the
3/20/00 draft for TW management's consideration. These changes are noted in
the attached document marked "CalpineO&M 10-18-00 edits to draft03-20-00".
With my 10-18-00 revisions, TW places a limit on its liability to Calpine for
loss or damage incurred by Calpine due to TW's Services, including loss or
damage to the existing M&C Facilities, if and to the extent damage is caused
by TW's negligent acts or omissions. To complete my modification to Section
5.3, TW is to insert the maximum aggregate amount of financial liability it
is willing to assume in any contract year. This amount could be the amount
of Calpine's deductible on its property insurance coverage or a lesser
amount. Whatever the amount chosen, please remember that TW is self-insured
for the first $2M, each occurrence. Therefore, what is the amount of risk
that TW is willing to pay out of its earnings if Calpine claims damage to its
existing Facility due to TW's negligent operations? That is the amount to
insert in the blank space in Section 5.3.

FYI, the changes in Sections 3.1 and 4.1 (b) and ©, and the striking of
Section 4.1 (d) do not create any substantive changes to the 3/20/00 draft.
I made the latter changes for stylistic reasons and to correct typos and
redundancies. Please call me if you have any questions and to let me know
the status of this document. I have lost track of my notes on the status of
TW Operations' review and approval of the list of Services included in
Exhibit B; this needs to be determined by Jeff (or his designee) before the
final definitive agreement is prepared for signing.

---------------------- Forwarded by Colleen Raker/ET&S/Enron on 10/18/2000
06:34 PM ---------------------------

Jeffery Fawcett
03/22/2000 12:26 PM
To: chadd@calpine.com
cc: (bcc: Colleen Raker/ET&S/Enron)

Subject: Draft- Operating Agreement

Chad,
Sorry it took so long to get back with you, but we've had some folks out
(including me) on Spring Break with their kids. Attached is a draft of the
Operating Agreement covering TW's operation of the metering station. It's
pretty much a standard form agreement for TW, with the possible exception of
the exhibit defining the operating parameters of the South Point plant. As I
mentioned to you in our meeting in Pleasanton, the operating parameters
exhibit is a useful tool for both companies to assist in identifing some of
the operating conditions the plant might encounter and the ability of TW to
load follow those conditions. I made a number of assumptions regarding the
burn rates for your facilities, especially the base rate and minimum rates.
You'll likely have to fine tune those numbers. Also, I've yet to ask our
engineers to secure the documentation necessary to complete Exhibit "A" from
your 3rd party engineers. We'll include it in the final version. Please
give me a call after you and your team has had a chance to review. Thanks.