S&P Statement of Principles

Attached is the agreement in principle reached today between TCPL and its
Stakeholders on terms TCPL is prepared to bring to the board if there is
broad enough industry support.

The following are the key changes from the draft distributed on Monday Feb 12.
Discretionary revenue sharing to TCPL subject to cap of $5M (from $7.5M)
with higher sharing percentages by revenue class.
AOS of 4% (from 2.5%) of FT demand charge paid as credit to IT invoice. 4%
is approx 240 mmcfd.
IT floor to be railed between 80% and 120% of FT toll but floating monthly
with marginal fuel cost.

There are two very controversial elements that may cause some parties to
litigate. TCPL has slipped in the severance costs for 200 employees that
were laid off in Dec 2000 but technically terminated in 2001. At $100K per
employee this works out to $20 m or about one cent on the Eastern Zone toll.
TCPL is also not willing to consider liquidating this year any of their 8 bcf
of storage working gas and are not even conceding that the gas belongs to the
shippers. Speculation is they have arbed much of it this winter and are
trying to pocket all of the upside with no benefit to the shippers who paid
for it.

If TCPL proceeds with this agreement without opposition then there will be a
cost of capital hearing to set the ROE and capital structure. If they don't
then there will be a lengthy rate hearing where many time consuming issues
such as higher depreciation will be debated. If TCPL proceeds with this deal
in the face of litigants (from the LDCs perhaps) it is unclear which issues
will be raised or how long the hearing will take.

TCPL is requesting by close of business Tuesday that we indicate whether we
will either
a. sign the agreement or
b. neither sign nor litigate or
c. litigate to NEB.

I understand from discussion earlier this week with Jon McKay and Rob
Milnthorp that Enron will choose Option B. We can review on Tuesday. If
anybody wants clarification on anything let me know.

Kevin

---------------------- Forwarded by Kevin Heal/CAL/ECT on 02/16/2001 03:52 PM
---------------------------

"John Lee" <john_lee@transcanada.com< on 02/16/2001 03:43:56 PM
To: Steve Emond <steve_emond@transcanada.com<
cc: Rob Whitmore <rob_whitmore@transcanada.com<, Marg Seeger
<marg_seeger@transcanada.com<, John Guerriero <jguerriero@duke-energy.com<,
Debbie Harris <debbie_harris@transcanada.com<, Phi Dang
<PDang@gazoductqm.com<, Adam White <adam_white@transalta.com<, Albert
Stortchak <stortcal@est.gov.on.ca<, Bill Wible <bill_wible@iroquois.com<, Bob
Fraser <bobfraser@aec.ca<, Brian Howell <behowell@interlog.com<, Brian Ridley
<bridley@hydro.mb.ca<, Brian Troicuk <troicuk@capp.ca<, Brian White
<bswhite@ceg.com<, Brian Woods <brian_woods@email.mobil.com<, Cheryl Worthy
<worthycg@bp.com<, Chuck Baumgart <cbaumgart@renaissance.ca<, Debbie White
<debbwhit@marathoncanada.com<, Diane Cameron <diane_cameron@nexeninc.com<,
Doug Holgate <doug.holgate@husky-oil.com<, Frank Brennan
<frank.brennan@cgc.enbridge.com<, Gilles Favreau
<favreau.gilles@hydro.qc.ca<, Ken Hadley <ken_hadley@pcp.ca<, Kevin Heal
<kevin.heal@enron.com<, Kurt McKnight <kmcknight@uniongas.com<, Lisa McMahon
<lisa.mcmahon@neg.pge.com<, Lyne Mercier <lmercier@gazmet.com<, Martin
Imbleau <mimbleau@gazmet.com<, mike verwegen <mverwegen@uniongas.com<, Mike
Stedman <mstedman@uniongas.com<, Murray Samuel
<murray_samuel@transcanada.com<, Robert Agnello <ragnello@edisonmission.com<,
Robert Andrews <randrews@coral-energy.com<, Peter Fournier <igua@magma.ca<,
Ron Moore <ronald.moore@esso.com<, Ronald Richard
<ronald.richard@mrn.gouv.qc.ca<, Shonda Day <days@epenergy.com<, Suzanne
Boucher-Chen <suzanne.boucher-chen@southernenergy.com<, Vern Gorr
<vgorr@saskenergy.sk.ca<, Frederic Morel <fmorel@gazmet.com<, Isabelle Quach
<iquach@gazmet.com<, Robert Rowe <rob.rowe@cgc.enbridge.com<, Richard King
<rking@powerbudd.com<, Dan Collins <dacollins@negm.com<, Mike Lucy
<mslucy@negm.com<, Nick Schultz <schultz@capp.ca<, Howard Stephens
<hstephens@hydro.mb.ca<, Brent Moen <bmoen@hydro.mb.ca<, Jeremy Slasor
<jeremy.slasor@demloak.com<, Jim Fisher <jfisher@duke-energy.com<, Janet
Holder <janet.holder@cgc.enbridge.com<, Rob Hemstock <rhemsto@ect.enron.com<,
Aleck Dadson <adadson@ect.enron.com<, Normand Stevenson
<nstevenson@gazmet.com<, Randy Fryer <rfryer@northlandpower.com<, Alan Reid
<alan_reid@pcp.ca<, John MacPherson <macpher@petro-canada.ca<, Alain Lefebvre
<alain.lefebvre@mrn.gouv.qc.ca<, craigl <craigl@cnrl.com<, swong
<swong@northlandpower.com<, rinde_powell <rinde_powell@pcp.ca<, "ed.bruton"
<ed.bruton@neg.pge.com<, lnixon <lnixon@tmvgas.com<, "jill.page"
<jill.page@gov.ab.ca<, Max Feldman <max_feldman@transcanada.com<,
"bernard.kramer" <bernard.kramer@mcnenergy.com<, bartlon
<bartlon@epenergy.com<, sharon johnson <sharonej@telusplanet.net<, Jack Hawks
<jack.hawks@neg.pge.com<, Tomasz Lange <tomasz.lange@southernenergy.com<,
Frank Basham <fbasham@talisman-energy.com<, peter milne
<pjmilne@telusplanet.net<, Jim Bartlett <jim_bartlett@transcanada.com<, Wendy
Hanrahan <wendy_hanrahan@transcanada.com<
Subject: S&P Statement of Principles

Enclosed for your review is a Statement of Principles regarding TransCanada's
Service and Pricing
Settlement for 2001 and 2002, resulting from discussions that took place in
Toronto on February 15 and
16. We request that Parties indicate by end of business on Tuesday, February
20 whether they:

1) Will be a Party to this Settlement; or

2) Will not be a Party to this Settlement but will either support or not
oppose the terms of the
Settlement when submitted to the National Energy Board for approval; or

3) Will oppose the Settlement and will litigate the terms of the
Settlement when filed for
approval with the National Energy Board.

On Wednesday, February 21 we will provide you with the details of the level
of support and will
indicate to you whether TransCanada is prepared to process this Settlement
[i.e. detailed MOU and NEB
Application] on the basis of the support received.

If TransCanada determines that it will process the Settlement, TransCanada
will wish to issue a press
release (indicating that a Settlement with a number of Parties has been
reached) because a Settlement
of this nature may be "material" to TransCanada shareholders.

We thank all Stakeholders for their valuable input into the development of
this Settlement.

- Statement of Principles_ML5 .doc