I think that this will continue to be a very sticky issue for us on all 
services deals and I think the following is the way to handle it.

We build into all of these contracts that the counterparty may at any time, 
chose to transact directly with a third counterparty.  We would still 
administer the contracts and perform the scheduling etc. for them if they 
chose to do this.  In this way, the customer may always chose to deal 
directly if they chose and we would be doing the scheduling.  I believe that 
this will serve to counteract concerns that we will not provide them fair 
market prices since they could always chose to deal directly.  We are 
confident that our prices are will be competitive and that the counterparty 
will chose to transact through us.  We would of course need to protect our 
share of the benefit in the case they transact with someone else.

Tom.




Kay Mann
05/11/2001 09:40 AM
To: Reagan Rorschach/ENRON@enronXgate
cc: Lloyd Will/HOU/ECT@ECT, Tom May/Corp/Enron@Enron, David 
Fairley/ENRON@enronXgate 

Subject: Re: MDEA Commercial Issues  

Another point:

How do we price gas/power we sell to them, especially in light of our duty of 
good faith and fair dealing?  

Not expecting an answer via email, this is just a topic for further 
discussion.

ckm




From: Reagan Rorschach/ENRON@enronXgate on 05/11/2001 09:03 AM
To: Lloyd Will/HOU/ECT@ECT, Tom May/Corp/Enron@Enron, Kayne 
Coulter/HOU/ECT@ECT, Richard Broussard/Corp/Enron@Enron, Kay 
Mann/Corp/Enron@Enron, David Fairley/ENRON@enronXgate, Jim Homco/HOU/ECT@ECT, 
Gerald Gilbert/HOU/ECT@ECT
cc:  

Subject: MDEA Commercial Issues

In an effort to get the commercial terms of the contract organized and 
papered, we discussed the following issues during yesterday's meeting:

? What will be the contracted process for setting the Bogey?
? What heat rates or heat rate ranges will go in the contract?
? Can we create a schedule to collar the Bogey given a certain gas price?
? Can we get a gas management fee for being the Fuel Manager? (this is a 
retrade)
? How does the network service transmission agreement including ancillary 
services get accounted for in the "cost" calculation?
? How does Imballance get sorted out at the end of the the month as a profit 
or a cost?

Regarding calculation of the Bogey, we have several issues.  First, what is 
the methodology?  Rick is very close to having a stack model that 
incorporates the business rules including minimum run times, startup costs, 
VOM, etc.  Second, what are the daily inputs and who is responsible for 
running the model?  This process will need to be documented every time the 
calc is performed.  Third, what is the timing of the calc?  We discussed 
getting the input info by 2am and doing the calc on a "day ahead" basis.  
Only on a select basis would the calc be re-done mid-day.

We are planning on meeting with Marvin next week and working to resolution on 
these issues.  This should result in a set of business rules that can be put 
into the contract.

Please comment/correct/add/subtract to any or all of the above.  David 
Fairley and I will be sending out the Marketing Strategy and Trading and Risk 
Policy later this morning.

Thanks,

Reagan