---------------------- Forwarded by Kay Mann/Corp/Enron on 09/19/2000 05:05 
PM ---------------------------


"Duncan, Allyson" <aduncan@kilstock.com> on 09/19/2000 05:01:00 PM
To: "'Reagan.rorschach@enron.com'" <Reagan.rorschach@enron.com>, "'Mann Kay'" 
<Kay.Mann@enron.com>, "'Chapman Tom'" <tom.chapman@enron.com>, "'Keenan 
Jeffrey'" <Jeffrey.M.Keenan@enron.com>, "'Kroll Heather'" 
<Heather.Kroll@enron.com>
cc: "Fine, Jonathan" <JFine@kilstock.com> 

Subject: FW: Enron

This is helpful to know, and we all need to discuss.

-----Original Message-----
From: Gisele Rankin [mailto:Gisele.Rankin@ncmail.net]
Sent: Tuesday, September 19, 2000 5:42 PM
To: Allyson Duncan
Subject: Enron
Importance: High


I got your message earlier about the order on the extension of time, but
didn't recall that the order dealt with the due date for rebuttal
testimony.  Since you said you were going to call Sammy Kirby anyway, I
didn't call back.

We had a meeting today to try to finalize our testimony.  We plan to let
you see it before we file it.  To start with, we do not want to reveal
any confidential information and secondly, Enron may be able to offer
input into the solutions for our concerns that would obviate any
official disagreements.

We currently have two alternative recommendations in our testimony.  One
gives Enron (EDC) a certificate conditioned on it filing a signed PPA
and evidence showing it has a long-term right to have its plant on the
site (such as a lease with Rocky Mount).  The other alternative doesn't
give you the certificate until you file those things, we review them,
etc..  We currently are favoring the first one and I'm sure Enron would
prefer the first one.

The control of the site is a little bit problematic.  In the
application, you say Enron has an option on the land.  In a data
response, you say you intend to give it (or sell it) to Rocky Mt. and
that it will own the land.  However, no arrangements have apparently
been made for Enron to have a long-term right to keep the plant on the
site. We have no objection to Rocky Mt. owning the land.  I hope that is
clear.  But we do have a problem with giving a certificate to Enron if
Enron has no long term right to be on the land.  (Control of the site
has always been one of the cornerstones of the requirements.  It is hard
to award a certificate for the construction of a plant on the basis of a
definite need for the capacity if the owner of the land could require
the plant owner to dismantle the thing the next year.)  This is
something that could be met later - after the order had gone out, if
Enron doesn't have a problem with that.  I can't imagine Enron being
willing to invest much money in the plant before it has a long term
lease or other arrangement.  It may be enough for your witness to state
that it won't give up the option or the ownership of the land unless and
until it has a long-term lease (or whatever).

Another issue is the status of EDC.  Your amendment says you're going to
create an LLC. EDC needs to exist before the certificate is awarded
because obviously we can't award a certificate to a nonexistent person. 
You don't need to file anything necessarily, but we need a showing
before the hearing that EDC has been or very shortly will be created. We
also need some assurance that Enron will capitalize EDC properly, which
I could get by asking your witness a couple of questions, if that is the
easiest way to do it. (This is not a big deal, but necessary to dot all
the i's and cross all the t's.)

Bob Hinton has been trading calls with Kay Mann (spelling?) about the
creation of the LLC and maybe some other things.  I wanted you to know
about these issues also, however, to keep you in the loop and also
because you may can get things done a little faster!

The only other issue is a rather complicated one.  Under the terms of
the PPA as currently drafted, Enron has until 10/31/01 to complete
construction, unless specifically excused. (This is in section 2.3.) If
Enron hasn't completed construction and declared Commercial Operation
before 10/31/01 (as extended due to excusable delays), then Enron has to
buy rights in Vepco's control area to capacity equal to the contract
capacity within 30 days.  If Enron doesn't fulfill that obligation,
Vepco, in its sole discretion, can terminate the Agreement.

Because Enron filed this application on the basis of the Vepco contract
and also because we do not have any guidelines on merchant plants yet,
we are using the contract (even though it is so short term) to justify
the need and hence the certificate.  (Otherwise, I'm afraid we go off
into a quagmire in terms of how to define a definite need in this brave
new world.  Obviously, Enron doesn't have time to wait until the generic
issues are resolved.)  Because the contract can be terminated however we
are uncomfortable with an open-ended certificate.  By rule, QF contracts
have to be renewed (rejustified) after five years if construction (isn't
begun or completed - I don't remember which).  We've taken the same
position by analogy except for a shorter amount of time with other
certificates, although I don't think we've officially had to take the
position.  (We told the Power Agency its certificate for this site was
too old, for example.)  We are leaning toward taking the position that
if the plant hasn't achieved commercial operation by November 30th (to
take into account the extra 30 days Vepco gives Enron to get rights to
capacity), unless excused, then the certificate expires and Enron will
have to rejustify it. We've discussed tying it to "significant
construction" having occurred, but anything other than commercial
operation is too subjective. We've also discussed having the certificate
become null and void, but thought that sounded too harsh and was perhaps
unfair if construction was well under way.  You may remember the
LG&E-Westmoreland Partners case, in which its first plant (ROVA I) gave
its QF host to a sister plant, with the first plant becoming an EWG (and
not a QF).  It basically had to rejustify its certificate and the
Commission reissued the certificate.  The construction of that plant was
well along at the time.

I hope to have a copy of our testimony to you early Thursday.  I know it
can take awhile to get through all the channels at Enron, but that's
probably as early as I can do it.  (I'll try for Wednesday p.m., but I
think that is too optimistic.)  We'd prefer to work things out or at
least reduce the degree and/or extent of any disagreements.  Please let
me know what Enron can or wants to do on the PPA, the option/lease, and
the creation of EDC. Supplemental testimony prefiled or done from the
stand would work on the latter two as would cross-examination.  For the
first one, we need a signed contract before the order goes out at the
VERY latest.  It would be nice to have it before the hearing..