Guillermo -

Before you send any letters, please make sure that Steve Montovano is the in loop.  He manages that region.

Jim

 -----Original Message-----
From: 	Canovas, Guillermo  
Sent:	Thursday, October 11, 2001 4:29 PM
To:	Cantrell, Rebecca W.
Cc:	Pharms, Melinda; Steffes, James D.
Subject:	New York regulatory restriccions

As a result of last Monday's gas meeting, today I attended a meeting with Barry Vanderhorst (EES), Paul Tate (EES) and Matthew Fleming (EWS) about the problems we are facing to supply New York State customers.
According to what they explained these problems have two main reasons:
1.	The PUC requirement that marketers should sign an affidavit stating that they have firm transportation to provide firm customers at city gate during winter. 
2.	The LDCs requirement that marketers must supply customers using a transmission mix (60%/40%, 70%/30%, etc) from different pipelines. This requirement prevents marketers from purchasing capacity only from the cheapest pipeline. Marketers are forced to purchase some capacity from expensive pipelines.

We agreed that there are two different cases:
1.	When Enron must use the LDC firm transportation capacity to comply with the PUC requirement. In this case the LDC could argue that they must allocate the FT capacity to free and captive customers with the same mix they have contracted with the different pipelines. If they allocated the cheap capacity to free customers, captive customers could have to pay a higher price, and this could be resisted by the PUC. The validity of this argument depends on the features of the pass through mechanism that is in place in every case.
Unless you know of (or we find out) other reasons, we considered that in these cases we should send a letter to the LDC (eventually with copy to the PUC) asking how was determined the required percentage mix.

2.	When we do not need to use the LDC firm transportation capacity to comply with the PUC requirement. In this case we did not find a clear reason for the LDC to require the marketer to purchase a transportation mix. The marketer is not using the LDC's capacity and should be allowed to reach the city gate from every possible pipeline.
Unless there is a valid reason, in these cases we considered that we should send a letter to the LDC, asking why do they make that requirement, which are their legal foundations, and how was determined the required percentage mix.

They will send me a mail with the mix requirement of every LDC, explaining in which cases we would have to use the LDC capacity.

We also discussed the case of Rochester Gas & Electric. This LDC has a deregulation program that only allocates 10% of their capacity to marketers.  Besides whenever there is an unbalance, part of it is considered as an injection to storage, but the rest is subject to the pipeline's penalties. They considered we need a higher injection right to storage. We agreed to discuss the issue after analyzing the rate schedule involved (SC5).

Melinda and I will look at the PUC regulations to try to find the answers to the above questions before preparing the letters.

Please let me know if this plan is OK with you.
Regards
Guillermo