pls print.  thanks. df
---------------------- Forwarded by Drew Fossum/ET&S/Enron on 01/26/2001 
02:06 PM ---------------------------


Nancy Bagot
01/26/2001 09:55 AM
To: Shelley Corman/ET&S/Enron@ENRON, Mary Kay Miller/ET&S/Enron@ENRON, Drew 
Fossum/ET&S/Enron@ENRON, Robert Kilmer/FGT/Enron@ENRON, Janet 
Butler/ET&S/Enron@ENRON, Dari Dornan/ET&S/Enron@ENRON, Glen 
Hass/ET&S/Enron@ENRON, Bambi Heckerman/NPNG/Enron@ENRON, Frazier 
King/FGT/Enron@ENRON, Teb Lokey/FGT/Enron@ENRON, Dorothy 
McCoppin/FGT/Enron@ENRON, Ray Neppl/NPNG/Enron@ENRON, Maria 
Pavlou/ET&S/Enron@ENRON, Janet Place/NPNG/Enron@ENRON, Michele 
Winckowski/ET&S/Enron@ENRON
cc:  

Subject: Tennessee Hourly Firm Service conference

Tennessee Tech. Conference on Order 637 including Hourly Firm Service
January 24, 2000


Though the conference was billed as a combo of Order 637 and Hourly Firm 
Service (FT-H rate schedule), Order 637 issues were not discussed.  Tennessee 
did a recap of where they are in that proceeding and explained how proposed 
changes to daily balancing impact FT-H.  

Basic Description of FT-H

? The target audience of the FT-H is combined cycle base load generation, not 
necessarily peaker plants, though the service is available to all shippers.  
? FT-H will be generally available capacity subject to an NPV open season.  
Contractual rights assigned to FT-H are firm daily quantities that can be 
nominated hourly as 1/18 to 1/4 of the daily quantity.  
? FT-H shippers must specify a 12-hour daily service period for MHQ 
eligibility (i.e., 7:00 a.m. to 7:00 p.m.) and daily receipt quantities have 
e to match delivery quantities on a contract basis (not necessarily on a flow 
basis).  
? Nominations have a one hour start-up and shut-down time.  
? Balancing is the same as regular firm with no hourly balancing charges
? Rates are analogous to storage charges, with three components: 
deliverability rate (hourly, 70%), capacity rate (daily, 30%), commodity 
charge (based on flow).

Summary

With only lukewarm support of the proposal at the conference, Tennessee will 
gather and send some clarifying material out to parties, but will also think 
about pulling the service at this time.  If they do continue with the FT-H 
proposal, the pipeline will file a modified proposal in two weeks with 
comments due in mid-March.  There may be a follow up conference to be 
scheduled at a later date.  A FERC order on the filing must be issued by 
mid-May.

FERC Staff stated that they prefer to keep Tennessee,s order 637 proceeding 
(RP00-477) separate from FT-H (RP01-81).  Tennessee met with customers on 637 
issues the following day (Jan. 24th) and will file a letter on their process 
going forward in RP00-477 by January 31st.

Discussion

After Tennessee,s explanation of the FT-H service, Staff asked questions 
about the impact of hourly service on other services, and began by asking if 
Tennessee could make public any modeling or service studies done to determine 
the impact of FT-H on other points (Staff noted that this analysis or 
transparent modeling should be filed for transparency).  This opened the 
debate about &historical operation,8 which is the focal point of existing 
shipper concern.  Shippers define historical operation as that they,ve 
received over time; Tennessee maintains that current tariff entitlements as 
contracted define current service, excluding enhanced services that may have 
been offered when available.

LDCs are concerned with losing these &enhanced8 historical services and argue 
that their contracts were signed so long ago that many of the services they 
use now were not available or defined then, and some, such as pressure, 
wouldn,t be acceptable today as written in their contracts.  At the heart of 
the matter, LDCs have become accustomed to access to more than 1/24 of their 
MDQ in an hour and do not want their capacity to be defined as such.  Also, 
there is concern over nomination priority using NPV to compete with FT-H.  

Other LDC concerns:  
? Preferences to secondary rights to FT-H over FT-A,
? Ability of FT-A to get MDQ on peak,
? NPV will bias against FT-A (Tennessee explained that a max rate FT-A 
shipper wins over FT-H because of total hourly capacity).

Generators, the alleged primary customer for this service, were lukewarm in 
their responses.  Calpine and Dynegy said that they,d likely stick to FT-A 
for their plants.  Though they encouraged FERC to accept the service, they 
were not convincing that they,d sign up for it today.  

Dynegy detailed a list of concerns and issues with the service:
? Dynegy,s not interested in the 12-hour designated block of time, they need 
more flexibility,
? Ramp up time isn,t adequate,
? Rates are too heavily weighted toward demand side,
? Service needs to be somehow standardized for capacity release and 
e-commerce,
? Penalty rates should not be based on power prices, 
? Third parties should be able to offer this in competition with Tennessee
? Offer FT-H as a seasonal service.