RE: Physical Delivery in SPP

To make sure that everyone is on the same page, my understanding is that Thane "owns" this issue from top to bottom - Thane needs to make the recommendation about moving forward or not.

Please keep me in the loop.

Jim

-----Original Message-----
From: Hetrick, Nancy
Sent: Monday, August 13, 2001 11:28 AM
To: Steffes, James D.
Subject: FW: Physical Delivery in SPP

FYI!

-----Original Message-----
From: Wagner, Joseph
Sent: Monday, August 13, 2001 9:21 AM
To: Hetrick, Nancy; Twiggs, Thane
Subject: RE: Physical Delivery in SPP

Nancy and Thane,

Thanks for sending this email. We are in the process of evaluating our appetite for business in SWEPCO and GSU. We do have load in both of these areas (non in WTU). The load in SWEPCO is likely to go away in a negotiation process with Rexam. However, we are running some numbers based on our curves and the prevailing tariff for a normal load shape customer in GSU and SWEPCO. We are looking at possible negotiating with these utilities to purchase their 15% at reasonable prices so as not to hurt them with a low price to beat and have large stranded costs in the process. I think the sooner Enron can participate in these markets ahead of competition, the more value there is to take advantage of. I will let you know what our analysis indicates. Thanks again for your email.

-Joe

-----Original Message-----
From: Hetrick, Nancy
Sent: Friday, August 10, 2001 2:46 PM
To: Merola, Jeff; Herod, Brenda F.; Smith, Ben; Woodward, Jason; Fite, Rebecca; Wagner, Joseph
Cc: Twiggs, Thane; Ryall, Jean; Kingerski, Harry; Steffes, James D.
Subject: Physical Delivery in SPP

The Staff of the PUCT has filed a petition to determine whether the market institutions and participants are ready for competition in the Texas portion of SPP (SERC), namely Entergy Gulf States, SWEPCO, and WTU power regions, copies attached. Staff has also requested the PUCT to suspend the capacity auction for Entergy and SWEPCO but not for WTU. The petition requests the PUCT to make the determination at the November 1, 2001, meeting and to suspend the capacity auction at the August 23, 2001, meeting.

In support of their petition, staff argues that there has been limited participation in the SERC region, based on an "informal survey" of the staff. Staff also explains that the FERC has not yet approved a RTO for the SERC region (SPP). Staff is concerned that if auction of capacity results in a low price, this will have a detrimental effect of the affiliated REPs headroom under the price to beat determination as it is all tied to the price of capacity at the auction. In addition, staff is concerned if Entergy or SWEPCO sells 15% of their capacity and are required to serve 100% of their load. The staff has not requested a delay in the WTU capacity auction due to the fact that the WTU capacity is located in ERCOT and WTU's relatively small load.

In order to prepare for filing comments, if neccessary, Enron Government Affairs would like to know the following:
1) Does EES/EWS have signed contracts for physical delivery in Entergy, SWEPCO or WTU?
2) What amount of load do we have contracted in each utility within SPP?
3) It appears that SPP will not open and no RTO will be in place on 1/1/02. Therefore, is EWS prepared to operate in SPP under the existing control area structure?

Please forward your responses to Thane Twiggs and myself. Also, please feel free to contact either of us if you have any questions. Thanks.

Thane Twiggs 713-853-3199
Nancy Hetrick 712-366-3399