Message-ID: <15630487.1075863330573.JavaMail.evans@thyme> Date: Fri, 9 Mar 2001 19:39:00 -0800 (PST) From: drew.fossum@enron.com To: steven.harris@enron.com Subject: RedRock Cc: susan.scott@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable Bcc: susan.scott@enron.com X-From: Drew Fossum X-To: Steven Harris X-cc: Susan Scott X-bcc: X-Folder: \DFOSSUM (Non-Privileged)\Fossum, Drew\'Sent Mail X-Origin: Fossum-D X-FileName: DFOSSUM (Non-Privileged).pst A couple of additional thoughts on this morning's conversation:=20 =20 1. if we really think the next 6 or 8 months will sort out the takeaway an= d receipt point capacity issues, why not bet the whole farm and try to hold= onto the whole 150 mm/d until next winter or fall and see if the perceived= value goes up? We could tell Calpine "no" on their bid and hold them off = for several months "negotiating" if that's what we thought would lead to th= e best value. I don't personally think this would be a prudent approach, b= ut its where our logic leads in the extreme, so we'd better be prepared to = explain why getting the bird in the hand from Calpine is smart. =20 2. We'll research the question of whether we can reject any recourse bids = that come in over the next 6-8 months if we decide to hold onto the 60 mm/d= for awhile. I've thought about it a bit more and I'm pretty sure you're n= ot going to like the answer. First, FERC says we've got to have a recourse= rate in place for all capacity, new or old. One reason is that there need= s to be a max rate that applies to long term capacity releases. We have th= e option on new projects to go with the existing max tariff rate or a new i= ncrementally designed rate. We are going with the existing tariff rate on = RedRock. Fine, but that makes the existing rate the recourse rate for all = purposes. FERC's logic will be that TW could sell all of the RedRock capac= ity at recourse rates (currently $.38) and never suffer a revenue shortfall= even if future rate cases reduce TW's overall rates, because the costs of = all TW's facilities--including the new project--will be considered in the n= ext rate case. Think about it--our rates will only go down in the future i= f the ENTIRE cost of service goes down. We'd never "lose money" on RedRock= , but we might not make as much as we could have made with an 15 year fixed= $.38 negotiated rate. There is another approach. We could have Mavrix submit a binding bid righ= t now for the 60 mm/d and just flat out sell it to them. That would send a= pretty strong signal to the market that we are serious about deadlines. T= he downside of that aggressive approach is that it would get us into the sa= me mess that El Paso finally got themselves out of, with Amoco, Dynegy and = the whole gang beating the crap out of us. I'm not to fired up about this = approach for that reason. I'll give you a call Monday after I've picked ou= r best regulatory brains on these issues. DF