Thanks for your response.  I have two initial comments/questions:

1.  I don't understand "D" in the formula shown in # 2 for AAF.  What is it,
how it is determined?  If D and M exclude MO, SO, and Force Majure, what is
left for "D"?

2.  If TVA only has rights to 4 of the 6 units, how would gas imbalance
charges be handled if both TVA and Enron are supply gas for the total plant?
Certainly there will be situations were units trip or fail to start, etc.
which will lead to imbalances.



> ----------
> From:  Rogers.Herndon@enron.com[SMTP:Rogers.Herndon@enron.com]
> Sent:  Thursday, January 11, 2001 7:37 AM
> To:  slgoza@tva.gov
> Cc:  Kevin.M.Presto@enron.com; David.Portz@enron.com;
> Elizabeth.Sager@enron.com
> Subject:  Tolling Proposal
>
> Stuart -
>
> Below are the responses to TVA's questions.  Please let me know if and how
> TVA would like to proceed from here.  EPMI remains interested in entering
> into a transaction with TVA.  However, as mentioned, EPMI is on track to
> release a bid proposal to several market participants early next week.  At
> this point, EPMI targets a release date of Wednesday am , 1/17/01.
>
> Please contact me at 713-853-7355 to discuss how we proceed from here.
>
> Thanks,
> Rogers Herndon
>
>
> ---------------------- Forwarded by Rogers Herndon/HOU/ECT on 01/11/2001
> 06:26 AM ---------------------------
>
> To:   Rogers Herndon/HOU/ECT@ect
> cc:
> Subject:  Tolling Proposal
>
> ---------------------- Forwarded by Rogers Herndon/HOU/ECT on 01/09/2001
> 09:26 AM ---------------------------
>
>
> "Goza, Stuart L." <slgoza@tva.gov> on 01/09/2001 09:06:21 AM
>
> To:   "'Goza, Stuart L.'" <slgoza@tva.gov>, "'Rogers.Herndon@enron.com'"
>       <Rogers.Herndon@enron.com>
> cc:   "'Kevin.M.Presto@enron.com'" <Kevin.M.Presto@enron.com>,
>       "'Elizabeth.Sager@enron.com'" <Elizabeth.Sager@enron.com>
> Subject:  RE: EPMI Draft Proposal
>
>
> When do you anticipate a response to these questions?
>
> We do have interest, but this information is important!  I hope that you
> will delay sending your proposal out to others until we have a chance to
> fully evaluate your offer.
> > ----------
> > From:   Goza, Stuart L.
> > Sent:   Monday, January 08, 2001 7:52 AM
> > To:     Goza, Stuart L.; 'Rogers.Herndon@enron.com'
> > Cc:     Kevin.M.Presto@enron.com; Elizabeth.Sager@enron.com
> > Subject:     RE: EPMI Draft Proposal
> >
> > Answers to these questions will assist us in determining our position
> > regarding your offer:
> >
> Certain of the following information is drawn from historical data as to
> the plant. Nothing below is a representation as to the plant's operability
> on a going-forward basis.
>
> > (1) Why is the proposed guaranteed availability (75%) so low in the
> > non-summer months?
>
> At the quoted monthly Demand Charge, EPMI feels that the guaranteed
> availability values are competitive.  Please note that 75% represents a
> guaranteed availability, and actual availabilty will be targeted at a much
> higher level.  Major maintenance would be completed during the non-summer
> months.
>
>
> > (2)  How do you propose that availability be calculated?
>
>  We propose that availability will be calculated using the following
> formula:
>
> AAF = (P*C - D - M)/P*C
>
> where:
>
> AAF = Actual Availability Factor for a given month
> P = the number of peak hours in a given month, where peak hours are HE 7 -
> 22 Sunday through Saturday (i.e. 7 days a week).
> C = the contracted quantity for that month (in units of MW's).
> D = The number of unit hours declared by EPMI not available in the peak
> hours of that given month times the maximum Contracted Capacity of that
> unit.
> M = The number of MWhs called on by Buyer in the peak hours of that given
> month, but not delivered by Seller for that month.
>
> Note:  Both D and M would exclude the Major Maintenance Outages (see
> below), Scheduled Outages (see below), outages due to Force Majeure,
> Buyer's inability to perform, including but not limited to
> non-availability
> of gas and/or gas transport, and EPMI's inability to operate the plant due
> to legal, regulatory or permitting restrictions or other reasons beyond
> the
> reasonable control of EPMI.
>
>
> 1.  Major Maintenance Outages (MO).  The Seller would be allowed 25 days
> per year per unit to conduct major maintenance.  MOs would not count
> against the Actual Availability Factor (see calculation below).  Seller
> may
> only schedule MO's with at least a 10 day notice and only during the
> months
> of October, November, December, March, and/or April.
>
> 2.  Scheduled Outages (SO).  The Seller would be allowed 72 hrs per month
> per unit to conduct scheduled maintenance.  SO's would not count against
> the Actual Availability Factor (see calculation below).  Seller will make
> commercially reasonable efforts to schedule SOs during non-peak periods
> (weekends and nights).  Seller may only schedule SOs with at least a 24
> hour notice.
>
>
> Note that the Guaranteed Availability Factor (GAF) would be set at 95% for
> the summer months, and 75% for the other months.  The contracted Full
> Demand Charge (FDC) for any given month would be paid by the Purchaser to
> the Seller as long as the Actual Availability Factor (AAF) is equal to or
> greater than the GAF (95% or 75%) for that month.  For any month in which
> AAF falls below the GAF of 95% or 75% depending on the month, the
> Purchaser
> (TVA) would pay the Seller (EPMI) a prorated amount of the FDC using the
> formula below.  This prorated amount is known as the Reduced Demand Charge
> (RDC).  Notice that an AAF of 50% or less for any given month would result
> in a floor Reduced Demand Charge of $2/kw-mo for that month.
>
> ADC = 2 + ((FDC - 2)/(GAF - 50))*(AAF - 50) as long as AAF is equal to or
> greater than 50% and less than or equal to the GAF (either 95% or 75%)
>
> ADC = $2/kw for months in which AAF is equal to or less than 50%
>
> ADC = FDC for months in which AAF is equal to or greater than the GAF
>
> where:
> ADC = Actual Demand Charge for a given month
> FDC = Full Demand Charge for a given month
> AAF = Actual Availability Factor (as defined  below). This number is given
> as a whole number (e.g. 97% is 97)
> GAF = Guaranteed Availability Factor (95%).
>
> All percentages are rounded to the next highest whole number (e.g. 94.7%
> becomes 95%; 94.4% becomes 94%).
>
>
> > (2)  Is the plant "winterized"  -- that is can it run in the cold
> weather?
>
> Significant upgrades were made to the plant after the 1999 calendar year
> to
> aid in winterization.  In general, however, even fully winterized plants
> tend to be less reliable in extremely cold weather.  It would be Buyer's
> responsibility to address natural gas availability and delivery concerns
> throughout the year, including winter months.
>
> > (3)  From a manpower standpoint, is the plant available 7x24 for all
> > months -- or are the certain periods of time when the plant is not
> > staffed?
>
>
> The plant is staffed or has members on ready recall 7x24.  However, in
> order to have full preparation time, a 3 hour notice is required prior to
> dispatch.  Dispatch outside M-F peak hours (5X16, HE 7 - 22) requires a 5
> hour dispatch notice.
>
> > (4)  What has been the historic availability of the plant (by month)?
>
> Using the formula above, the Actual Availability Factor (AAF) for the
> plant
> by month for calendar year 2000 is shown below:
>
> Jan  100%
> Feb  99%
> Mar  100%
> Apr  100%
> May  97%
> Jun  97%
> Jul  99%
> Aug  100%
> Sep  100%
> Oct  100%
> Nov  100%
> Dec  100%
>
> Note that approximate average per unit run hours during calendar year 2000
> was 215 hours.
>
> > (5)  What type of gas transportation has been historically used --
> > interruptible or firm?
>
>
> Historically EPMI has utilized both firm and interruptible gas
> transportation depending on availability.
>
> > (6)  Has the plant ever been unavailable due to the inability of fuel?
>
> Only once since plant construction.  This occurred during a run-time with
> minimal advance notice.  In general, fuel availability is the
> responsibility of the Buyer and is more readily available with greater
> advance notice.  Note also that the plant was only minimally run during
> the
> most recent winter season due to non-economic dispatch conditions;
> therefore, the availability of gas this past winter was not tested.  EPMI
> is willing to discuss with Buyer making the facility a dual fuel plant,
> subject to permitting restrictions and operational parameters, and
> effected
> at Buyer's expense.
>
>
> > (7)  Am I correct in assuming that in the tolling type arrangement, TVA
> > has exclusive use of the plant --- that is Enron would not have access
> to
> > the output unless TVA specifically waives its rights?
>
> EPMI would not have access to specific units of the plant while those
> units
> were being dispatched by TVA.  The plant has six units and four would be
> designated by unit number to TVA for purposes of the tolling agreement.
> EPMI could call on units not being dispatched by TVA.
>
>
> >
> >    ----------
> >    From:     Rogers.Herndon@enron.com[SMTP:Rogers.Herndon@enron.com]
> >    Sent:     Thursday, January 04, 2001 2:22 PM
> >    To:  Goza, Stuart L.
> >    Cc:  Kevin.M.Presto@enron.com; Elizabeth.Sager@enron.com
> >    Subject:  RE: EPMI Draft Proposal
> >
> >
> >    Stuart,
> >
> >    Yes, the 800 hours are annual limits.  I apologize for the
> > confusion.
> >
> >    EPMI is currently finalizing a bid solicitation for the New Albany
> > tolling
> >    service.  We anticipate sending this proposal to interested parties
> > by the
> >    middle of next week (1/10/01).  In the event EPMI and TVA have not
> > entered
> >    into exclusive negotiations by the time of the bid offering, EPMI
> > would
> >    encourage TVA to join the bid process.  We anticipate this process
> > lasting
> >    two weeks.
> >
> >    Please feel free to give me a call if you have any further
> > questions.
> >
> >    Rogers Herndon
> >    713-853-7355
> >
> >
> >
> >
>
>
>
>