fyi.
---------------------- Forwarded by Lloyd Will/HOU/ECT on 03/05/2001 07:28 AM 
---------------------------


"will lloyd" <lwill@houston.rr.com> on 03/04/2001 08:12:37 PM
To: <lloyd.will@enron.com>
cc:  
Subject: meam




Delta  Development
	
	
	February, 1999  Issue
	
	Meam dispute reflects more issues than  money  
	
	BY NANCY cotten HIRST  
	Contributing Editor, Delta Business Journal
	 
	
	On the surface, the dispute between the Municipal Energy Agency of  
Mississippi (MEAM) and the Clarksdale/Yazoo City alliance appears to be  
about money and contracts. Yazoo City and Clarksdale say they are pulling  
out of the eight-city energy-supply association because they can provide  
power to their cities less expensively on their own.
	
	MEAM says that they have the right to do this, but only in accordance  with 
the original MEAM contract, which specifies that an entity can only  withdraw 
from the agency on condition of five years, written notice. This  provision 
is typical of this type contract and lends a degree of stability  to a 
coalition of political bodies.
	
	Complicating the matter is the fact the MEAM has financed the upgrading  of 
the generating facilities at Yazoo City and Clarksdale. The total  project 
upgraded three frame-five gas turbines and added three waste heat  recovery 
steam generators and cost in excess of $10 million. Part of this  project was 
paid for by MEAM revenues and the rest by a $5 million 1994  bond issue.
	
	The Greenwood generating facility was also part of this project, but  
Greenwood elected to pay out of other resources rather than participate in  
the bond issue. This leaves seven cities responsible for the bond issue  and 
dependent on the generating capacity of the two cities for a portion  of 
their electrical power supply.
	
	MEAM also purchases power from other resources to supplement the  generating 
capacity of Yazoo City, Clarksdale and Greenwood. SEPA, Cajun  Electric 
Cooperative, Oklahoma Gas and Electric and Entergy Services, Inc.  are among 
recent suppliers with Entergy holding the largest contracts.
	
	The exit of Yazoo City and Clarksdale from MEAM would hurt the  organization 
not only in loss of generating power but also in the loss of  volume 
purchasing power from other supplies. This type loss is one of the  reasons 
for a five-year notice in the original contract. The other cities  involved 
in MEAM would be given time to deal with the adverse impact.
	
	Clarksdale and Yazoo City, however, say that MEAM has broken its  contract 
with them. The two cities plan to form their own alliance to take  advantage 
of the savings that they perceive to be available in the  deregulated 
wholesale energy market. They also plan to buy out the bond  issue obligation 
from MEAM and finance it through revenue bond issues of  their own.
	
	At this point the story breaks down into two other issues. One is a  very 
legitimate difference in style of operation and management between  MEAM and 
the two cities. The other is a rather obvious problem with power,  
personality and disgruntlement.
	
	Neil Davis, General Manager for MEAM, admits to being conservative in  his 
management style. "I,m the first to say we,re not where we,d like to  be 
costwise," Davis says, "but we know that we,ve controlled and lowered  costs 
over the years. We,re very competitive and have the lowest costs in  the area.
	
	"Entergy views MEAM as a good wholesale customer and they do all they  can to 
work with us. We have a good track record with them. We are moving  
cautiously. We,re not going to abandon a good relationship unless we are  
sure it will improve our circumstances. We look at the end of the year,  not 
each transaction," Davis continues.
	
	"Entergy provides a load-following service that keeps the load balanced  and 
has energy follow demand on an instantaneous basis. Our facilities are  not 
equipped to do this. We know Entergy can and will do this and we don,t  have 
the track record with other suppliers."
	
	Bob Priest, General Manager of the Yazoo City Public Service  Commission, is 
much more daring in his approach. "You have to take a risk  from time to 
time," he says. "MEAM hasn,t changed in the last ten years,  and the utility 
industry has changed drastically."
	
	Public Service and other officials from both Clarksdale and Yazoo City  are 
furious about the new contract with ESI. Both cities would prefer not  to do 
business with Entergy at all, an attitude that has little or nothing  to do 
with MEAM. Both parties admit that there have been divisive issues  for three 
or four years, but the recent contract seems to have been the  straw that 
broke the camel,s back.
	
	Sources who prefer to remain unnamed say that there are other problems.  
Various people are angry at staff for various personal reason. Others see  a 
conflict of interest in Public Service professionals being on the Board,  
which was designed as a citizen review entity. They say it puts them in  the 
position of being able to review their own performance. Comments from  people 
from the unhappy cities, including their attorney,s presentation to  the 
Board, contain thinly veiled accusations of wrongdoing that border on  
character assassination.
	
	As accusations and recriminations fly, many in the Delta are  disappointed in 
a situation that is likely to bring harm to all eight  cities. If the cities 
do successfully pull out of MEAM, it will be  interesting to see if, as in 
Aesop,s fable, the hare or the tortoise wins  the race. DBJ