-----Original Message-----
From: 	Richter, Jeff  
Sent:	Wednesday, August 15, 2001 5:06 PM
To:	Stokley, Chris
Subject:	FW: 90-110 Band



 -----Original Message-----
From: 	Bresnan, Neil  
Sent:	Wednesday, August 15, 2001 4:54 PM
To:	Richter, Jeff
Subject:	90-110 Band


Chris,

This is Richter, Neil had reviews to do so I finished up with the email.  Hope this helps.  Let me know if you need anything else.

Richter

Several deals have no band (1998 ) see note from Dennis
+
The issue with the bands is how to price them.  On the surface the band is the same as selling the customer a call and a put 
in actual fact the customer is not going to always exercise the option on a purely economic basis. Building managers need to keep the lights on even when it is hot. +
Most of our contracts contemplate the establishment of a baseline during the first year of the contract. Most of our consumption bands are settled on an annual basis giving the client a huge swing on an intramonth basis. 
+
New clients have consumption bands which are calculated on a monthly basis and settled with the customer on an annual basis. 
+
We don't currently manage the position aggressively.  Intramonth we forecast load for clients and assume all the load is physical when in fact after a customer goes over (or under) the band we should be buy index for the over under. 

Chris,  Richter takes over

1999 deals:  most deals in 1999 have a consumption band which gets settled annually.  

2000 deals as of feb - consumption bands with monthly settlements

New deals  - See Neil's notes above

One thing to remember is that the customer is exposed to hourly index price and grid charges on every kw they use outside the band and we owe them if they underconsume.  this needs to be flashed and then actualized when the data is available.  One note is that all the existing contracts up to EWS taking over have this little flaw:  the customer is exposed to the hourly price and we wear the risk of all the grid charges.  (Not good!!!)