Attached is a copy of the VEPCO Interconnection Agreement on which I have 
made certain changes and included comments in bracketed notes.  (Most of the 
notes could be included in a mark-up sent back to VEPCO; there is one marked 
"Note to Enron" that is intended to be deleted before we send this out.)

The Agreement, as might be expected, is very  one-sided and is written 
primarily for their protection.  It is also very repetitive in places, 
although I did not attempt to eliminate the repetition on the theory that the 
fewer changes we propose the better and we can probably live with the 
repetition.  There are several provisions or concepts I would like to suggest 
we include from the form I had prepared a couple of weeks ago (which was 
based on the EPSA model form, and was clearly more favorable to the 
generation owner than VEPCO's form.)  I have not yet included these changes, 
as I thought we should discuss them first and decide how best to proceed on 
this draft.  Those provisions are as follows (section references are to the 
draft I prepared):

2.43.  Right to tell VEPCO to suspend or terminate work on interconnection 
facilities.

2.4.4  Requirement for Vepco to provide status reports on progress of 
construction of interconnection facilities.

2.5.2 (maybe)  Agreement to start work on facilities before all studies 
complete, if generator owner willing to bear risk of extra costs.

2.7.1 Undertaking by Vepco to use reasonable efforts to complete on schedule 
(actually, if 4.2.2 is used, this section probably should not be used.)

3.11.3 (last sentence)  Vepco liable for costs for modifications to 
generator-owned interconnection facilities and the Facility if changes 
required because of changes to Vepco facilities (unless required by law).

4.1 Vepco must inform generator owner if costs exceed estimate by more than 
10% and such increase is subject to generator owner's consent.

4.2.2 Concept that Vepco must seek bids for the work and generator owner can 
choose whether the work is done with best efforts undertaking to complete on 
time, but no penalties/incentives or with firm completion date and 
penalties/incentives.

4.3  Generator owner to provide letter of credit for cost of work or 
guarantee (as opposed to 50% paid in advance, as provided in Vepco's draft.  
By the way, even if we agreed to pay 50% in advance, it should not be on 
signing the agreement, but rather before they start the work.)

4.8.1  Refund if Vepco receives money back.

4.9.1  Language re tax gross up (in lieu of the last sentence in their 
Section 7.3.)

5.1  Last sentence--add generator owner's schedules and output,etc. being 
confidential.


In addition, there were a few things in the draft I wanted to point out, as 
follows:

In Section 2.2.3 and elsewhere in the agreement, they reserve the right to 
make a unilateral filing with FERC to amend the agreement.  The generator 
owner would have the right to protest the filing, but I want to check with 
our regulatory people as to whether they can waive this right, as I don't 
think it's fair for them to unilaterally amend it.

Article 4.6 should be reviewed by technical folks.

In Section 10.2.1.3, they reserve the right to file the agreement with FERC 
even if the parties haven't agreed and executed it yet and they start service 
under the agreement.  As noted above, it's putting your fate in FERC's hands.

The indemnity of Vepco's employees and waiver of the protection of worker's 
comp laws in Section 10.5.1 (and the reciprocal in 10.5.2) seemed strange to 
me and I was wondering if you could run this past your risk management people.

I look forward to discussing this with you further.


 - 1155119.doc