Message-ID: <16425022.1075842237182.JavaMail.evans@thyme>
Date: Tue, 20 Mar 2001 08:17:00 -0800 (PST)
From: dan.hyvl@enron.com
To: barbara.gray@enron.com
Subject: Calpine Cogeneration Facility(s) relations
Mime-Version: 1.0
Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: 7bit
X-From: Dan J Hyvl
X-To: Barbara N Gray
X-cc: 
X-bcc: 
X-Folder: \Dan_Hyvl_Dec2000_June2001\Notes Folders\All documents
X-Origin: HYVL-D
X-FileName: dhyvl.nsf

Texas City Facility -
 The relationship between HPL and Calpine has become and continues to be 
strained.  Calpine purchased the Texas City Cogeneration Facility from Enron 
and Dominion Resources in early 1998.  Prior to that time ENA supplied 45,000 
MMBtu of gas under a fixed price contract and a Market Price agreement was in 
place to provide any additional volumes that might be needed in addition to 
that which Union Carbide Corporation had the contractual right to supply 
under the historic arrangement, since they were the steam host for the 
facility.  After Calpine took over, these contracts either expired or were 
terminated.  At this point HPL became the sole supplier to the facility 
although the interconnection with the Union Carbide delivery point with the 
Calpine facility remained active and a new Transaction Agreement was put in 
place whereby Calpine agreed to certain minimum and maximum quantity 
obligations and agreed on the prices that would be paid for any short fall in 
volumes.  Since then, measurement disputes have been alleged and Calpine has 
shortpaid HPL's invoices even after verbally agreeing that the amounts 
invoiced were correct.  Additionally, as a result of Calpine's power 
purchaser's last minute notification to Calpine of reductions in the purchase 
of power for the next day, which notification is usually after Calpine's next 
day notification deadline to HPL, Calpine has resorted to the use of  
creative force majeure situations in an effort to reduce their costs.  These 
notifications have occurred some thirteen (I think) times and Calpine has 
provided little explanation to HPL of the nature of these events of force 
majeure.  When pressed for a more detailed explanation, they merely state 
that they had to take down various unit(s) to repair or replace leaking 
valves, etc.

Clear Lake Facility -
 The relationship between Calpine and HPL is not as strained with regard to 
deliveries at this facility.  This may be because the contract covering the 
base volume of gas being delivered by HPL has not changed since it was 
negotiated by ENA in 1995.  Midcon remains connected to the facility and 
delivers certain quantities of market priced gas.  Market priced gas is 
required by the facility when its requirements exceed the base volumes 
supplied under the 1995 agreement.  Should the power purchase agreement be 
amended to allow Calpine not to deliver powered or should the power purchaser 
cancel the power purchase agreement, Calpine has negotiated an amendment 
allowing for the delivery of the base volumes at alternative delivery 
points.  Currently, HPL has advised Calpine of an upcoming event of force 
majeure which will require a cessation of deliveries of gas to the facility 
which certain regulatory mandated tests are being performed on the A-S 
pipeline.  It is not known whether the Midcon delivery point has the capacity 
to handle the entire facility gas requirements or not.