Narsimha,

Good point, and the key is that BGE's standard offer includes a $7 "retail adder" to the market-based price.  This retail adder was part of BGE's settlement agreement.  To the extent all of our deal costs (including a scheduling fee) and origination margin are notably less than $7, then customers will be better off under our index product.

Bob



From:	Narsimha Misra/ENRON@enronXgate on 09/21/2001 05:34 PM
To:	Bob Hansen/HOU/EES@EES, Michele Raque/ENRON@enronXgate
cc:	Liqun Pan/ENRON@enronXgate, Berney C Aucoin/ENRON@enronXgate, Edith Cross/ENRON@enronXgate, John D Burrows/HOU/EES@EES, Gillian Johnson/HOU/EES@EES, James M Wood/HOU/EES@EES, Richard Ring/ENRON@enronXgate, John B Gordon/HOU/EES@EES 
Subject:	RE: BGE Index Product - Change to LMP BGE Zone Index

fyi...There is a scheduling fee that needs to be added to the deal costs...and just for my curiosity what is the reason why the customer would switch to us instead of staying with the incumbent utility with this product??? isn't this exactly the SO product being offered by the utility without the origination margin???
-narsimha

 -----Original Message-----
From: 	Hansen, Bob  
Sent:	Friday, September 21, 2001 4:32 PM
To:	Misra, Narsimha; Raque, Michele
Cc:	Pan, Liqun; Aucoin, Berney C. ; Cross, Edith EES; Burrows, John; Johnson, Gillian; Wood, James; Ring, Richard; Gordon, John
Subject:	BGE Index Product - Change to LMP BGE Zone Index

Narsimha/Michele,

Thanks for helping us with this index product issue.

We were initially planning to use an East Hub index with a basis of all uplifts, but Gillian and I agree with you on the advantages of using an index of PJM LMP zonal prices including all uplifts.  The product will certainly be more comparable to BGE's standard offer pricing, and it will eliminate the basis risk that you would have had with the East Hub index product.  A BGE zone index product will also eliminate the price comparison issues we had due to congestion.  

Based on today's discussion we will modify the design of the BGE index product proposal to reflect a pass-through of LMP BGE zone prices and uplifts.  The basis for this product would simply be deal costs and origination margin.

Gillian and I will work with Berney's group on changes to the TC, and a modified Product Approval Template will be routed soon.

Thanks again,
Bob