---------------------- Forwarded by Jeffery Fawcett/ET&S/Enron on 10/05/2000 03:52 PM ---------------------------


Shelley Corman
10/04/2000 10:57 PM
To:	Mary Kay Miller/ET&S/Enron@ENRON, Drew Fossum/ET&S/Enron@ENRON, Susan Scott/ET&S/Enron@ENRON, Glen Hass/ET&S/Enron@ENRON, Jeffery Fawcett/ET&S/Enron@ENRON, Lee Ferrell/ET&S/Enron@Enron, Steven Harris/ET&S/Enron@ENRON
cc:	"Nancy, Bagot" <nancy-bagot@starpower.net> 

Subject:	TW Options Pre-Filing Meetings With FERC Today


I think we had really good meetings today with both FERC rates & policy staff.  Jeff and the whole team did an excellent job of drawing them into the discussion.  By the end of both sessions I thought that they seemed genuinely interested in the proposal and anxious to see the filing.  Mike Coleman went so far as to suggest that to the extent we can make the case the this will be a tool in the generation siting process, we would be helping his group with Chairman Hoecker's directive for staff to develop concepts to respond to the SW power crunch.   

Attendees
Rates/Tariff Group Attendees (OMTR Rates West):  Mike Coleman, Bob Petrocelli, John Carlson
Policy Group Attendees:  Ed Murrell,  Laurel Hyde, Kim Bruno, Kathleen Dias & Demi Pulas 

Things They Liked
Service/Rate Structure.  They seemed to like the fact that the underlying agreement is an FT and fact that the transaction remained subject to current rate provisions.
Open bidding for shipper calls
We will only sell call options when we have available capacity
The underlying FT and the option amendment can be released to another shipper through capacity release 

Concerns that Need to Be Addressed in the Filing
Concentration of capacity/hoarding/affiliate issues.  Mike Coleman said that we need to address this issue head on in light of El Paso/CPUC cases.  They are worried that huge block of future capacity rights could be tied up by a single offering.  On the other hand, he said that perhaps we can use this filing as an opportunity to explain how our bidding on shipper calls adds improved transparency and protections.  One possible way to address this is to promise that the time frame for posting/bidding on shipper calls will depend on the size of the block.  (e.g. a 20 M/D package might involve a day bidding process, a 100 M/D block may involve a week posting).
Demonstrate that puts/calls don't undercut the release market.  Explain that release is used for day to day decisions, while we believe options will serve to help shippers with longer term strategic decision.
Be specific about any waivers of the part 284 regulations.
Work on the definition of the 4 options types.  They stumbled over some of the wording, like the use of phrase "recall" in the transporter call.


Detailed Notes
We had a surprisingly positive reception from Rates West.  This could be due in part to Mike Coleman's reputed continued interest on the electric side and his self-proclaimed corporate bent.  He did say that he understands the underlying business drivers for this program  and suggested that a flushed out narrative with the filing to explain these would help our efforts. He said that the timing on this type of offering is good now, as the Chairman is pressuring Staff to improve the marketplace (the California situation again).

Both groups suggested that we needed to lay out as much detail as possible in the filing, including examples of each type of options.  

As Mike delineated and we expected, the major issues that may cause discomfort are affiliate abuse and capacity hoarding (cornering the market under a long-term option) or speculative capacity holding.  To defend the service, we should lay out the impacts and explain why this offers an improvement over our present situation (discounted firm).  

Some Specific Questions from the Rates group included:
	How does this impact capacity release
	How does TW protect against hoarding
	Why aren't all options considered negotiated rates. 
	Are options tradable alone (without capacity)
	Would the availability of options change the volume of capacity held by ENA
	How are ROFRs affected
	
Some Specific Questions from the Policy group included:
	What are discriminating parameters/business decisions in allocating capacity
	How are competing offers allocated when in excess of available capacity
	How are options posted, bid on?  
	What are parameters of the options, specify range & degree of flexibility (explain whether strike dates are fixed) 
	What is the "trigger" or notice period for either a Call or Put; is it in the contract
	Is this a physical or financial product
	Does this verge into negotiated T&C territory?
	Is this like Koch's option proposal?  (No - Koch offers an option on price only)