Attached is the agreement in principle reached today between TCPL and its 
Stakeholders on terms TCPL is prepared to bring to the board if there is 
broad enough industry support.

The following are the key changes from the draft distributed on Monday Feb 12.
Discretionary revenue sharing  to TCPL subject to cap of $5M (from $7.5M)  
with higher sharing percentages by revenue class.
AOS of 4% (from 2.5%) of FT demand charge paid as credit to IT invoice.  4% 
is approx 240 mmcfd.
IT floor to be railed between 80% and 120% of FT toll but floating monthly 
with marginal fuel cost.

There are two very controversial elements that may cause some parties to 
litigate.  TCPL has slipped in the severance costs for 200 employees that 
were laid off in Dec 2000 but technically terminated in 2001.  At $100K per 
employee this works out to $20 m or about one cent on the Eastern Zone toll.  
TCPL is also not willing to consider liquidating this year any of their 8 bcf 
of storage working gas and are not even conceding that the gas belongs to the 
shippers.  Speculation is they have arbed much of it  this winter and are 
trying to pocket all of the upside with no benefit to the shippers who paid 
for it.

If TCPL proceeds with this agreement without opposition then there will be a 
cost of capital hearing to set the ROE and capital structure.  If they don't 
then there will be a lengthy rate hearing where many time consuming issues 
such as higher depreciation will be debated.  If TCPL proceeds with this deal 
in the face of litigants (from the LDCs perhaps) it is unclear which issues 
will be raised  or how long the hearing will take.

TCPL is requesting by close of business Tuesday that we indicate whether we 
will either
a. sign the agreement or
b. neither sign nor litigate or
c. litigate to NEB.

I understand from discussion earlier this week with Jon McKay and Rob 
Milnthorp that Enron will choose Option B.  We can review on Tuesday.  If 
anybody wants clarification on anything let me know.

Kevin

---------------------- Forwarded by Kevin Heal/CAL/ECT on 02/16/2001 03:52 PM 
---------------------------


"John Lee" <john_lee@transcanada.com> on 02/16/2001 03:43:56 PM
To: Steve Emond <steve_emond@transcanada.com>
cc: Rob Whitmore <rob_whitmore@transcanada.com>, Marg Seeger 
<marg_seeger@transcanada.com>, John Guerriero <jguerriero@duke-energy.com>, 
Debbie Harris <debbie_harris@transcanada.com>, Phi Dang 
<PDang@gazoductqm.com>, Adam White <adam_white@transalta.com>, Albert 
Stortchak <stortcal@est.gov.on.ca>, Bill Wible <bill_wible@iroquois.com>, Bob 
Fraser <bobfraser@aec.ca>, Brian Howell <behowell@interlog.com>, Brian Ridley 
<bridley@hydro.mb.ca>, Brian Troicuk <troicuk@capp.ca>, Brian White 
<bswhite@ceg.com>, Brian Woods <brian_woods@email.mobil.com>, Cheryl Worthy 
<worthycg@bp.com>, Chuck Baumgart <cbaumgart@renaissance.ca>, Debbie White 
<debbwhit@marathoncanada.com>, Diane Cameron <diane_cameron@nexeninc.com>, 
Doug Holgate <doug.holgate@husky-oil.com>, Frank Brennan 
<frank.brennan@cgc.enbridge.com>, Gilles Favreau 
<favreau.gilles@hydro.qc.ca>, Ken Hadley <ken_hadley@pcp.ca>, Kevin Heal 
<kevin.heal@enron.com>, Kurt McKnight <kmcknight@uniongas.com>, Lisa McMahon 
<lisa.mcmahon@neg.pge.com>, Lyne Mercier <lmercier@gazmet.com>, Martin 
Imbleau <mimbleau@gazmet.com>, mike verwegen <mverwegen@uniongas.com>, Mike 
Stedman <mstedman@uniongas.com>, Murray Samuel 
<murray_samuel@transcanada.com>, Robert Agnello <ragnello@edisonmission.com>, 
Robert Andrews <randrews@coral-energy.com>, Peter Fournier <igua@magma.ca>, 
Ron Moore <ronald.moore@esso.com>, Ronald Richard 
<ronald.richard@mrn.gouv.qc.ca>, Shonda Day <days@epenergy.com>, Suzanne 
Boucher-Chen <suzanne.boucher-chen@southernenergy.com>, Vern Gorr 
<vgorr@saskenergy.sk.ca>, Frederic Morel <fmorel@gazmet.com>, Isabelle Quach 
<iquach@gazmet.com>, Robert Rowe <rob.rowe@cgc.enbridge.com>, Richard King 
<rking@powerbudd.com>, Dan Collins <dacollins@negm.com>, Mike Lucy 
<mslucy@negm.com>, Nick Schultz <schultz@capp.ca>, Howard Stephens 
<hstephens@hydro.mb.ca>, Brent Moen <bmoen@hydro.mb.ca>, Jeremy Slasor 
<jeremy.slasor@demloak.com>, Jim Fisher <jfisher@duke-energy.com>, Janet 
Holder <janet.holder@cgc.enbridge.com>, Rob Hemstock <rhemsto@ect.enron.com>, 
Aleck Dadson <adadson@ect.enron.com>, Normand Stevenson 
<nstevenson@gazmet.com>, Randy Fryer <rfryer@northlandpower.com>, Alan Reid 
<alan_reid@pcp.ca>, John MacPherson <macpher@petro-canada.ca>, Alain Lefebvre 
<alain.lefebvre@mrn.gouv.qc.ca>, craigl <craigl@cnrl.com>, swong 
<swong@northlandpower.com>, rinde_powell <rinde_powell@pcp.ca>, "ed.bruton" 
<ed.bruton@neg.pge.com>, lnixon <lnixon@tmvgas.com>, "jill.page" 
<jill.page@gov.ab.ca>, Max Feldman <max_feldman@transcanada.com>, 
"bernard.kramer" <bernard.kramer@mcnenergy.com>, bartlon 
<bartlon@epenergy.com>, sharon johnson <sharonej@telusplanet.net>, Jack Hawks 
<jack.hawks@neg.pge.com>, Tomasz Lange <tomasz.lange@southernenergy.com>, 
Frank Basham <fbasham@talisman-energy.com>, peter milne 
<pjmilne@telusplanet.net>, Jim Bartlett <jim_bartlett@transcanada.com>, Wendy 
Hanrahan <wendy_hanrahan@transcanada.com> 
Subject: S&P Statement of Principles


Enclosed for your review is a Statement of Principles regarding TransCanada's 
Service and Pricing
Settlement for 2001 and 2002, resulting from discussions that took place in 
Toronto on February 15 and
16.  We request that Parties indicate by end of business on Tuesday, February 
20 whether they:

    1)  Will be a Party to this Settlement;  or

    2)  Will not be a Party to this Settlement but will either support or not 
oppose the terms of the
Settlement when submitted to the National Energy Board for approval;  or

    3)  Will oppose the Settlement and will litigate the terms of the 
Settlement when filed for
approval with the National Energy Board.

On Wednesday, February 21 we will provide you with the details of the level 
of support and will
indicate to you whether TransCanada is prepared to process this Settlement 
[i.e. detailed MOU and NEB
Application] on the basis of the support received.

If TransCanada determines that it will process the Settlement, TransCanada 
will wish to issue a press
release (indicating that a Settlement with a number of Parties has been 
reached) because a Settlement
of this nature may be "material" to TransCanada shareholders.

We thank all Stakeholders for their valuable input into the development of 
this Settlement.

 - Statement of Principles_ML5 .doc