Subject: Ohio - A Bad Turn
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked]
Date: Sat, 15 Apr 2000 12:15:00 -0700 (PDT)

Steve, 

For our conference call on Monday, I thought it would be useful for you to 
have this.  The summary is pretty much the same, except that the shopping 
incentive for commercial customers increased by 5%, however, that is still 
not enough to make it work for us.

Under the stipulation, the dollars FE is to receive are not quantified and my 
sense is that FE probably got very close to what they asked for.  Their 
request was for $6.9 billion net of deferred taxes (the number they used 
publically); however, with the deferred taxes added in, this becomes $8.7 
billion.  The recovery period for the CTC is Dec. 31, 2006 for OE, June 30, 
2007 for TE and Dec. 31, 2008 for CEI subject to the usual caveats.  The 
total transition revenues on a net present value basis is $9.1 billion and in 
nominal dollars, $12.3 billion.

In calculating their transition costs, FE used a rate of return for the GTC 
of 15.38% for OE, 13.15% for CEI and 13.13% for TE.  For the RTC, FE used a 
rate of return of 14.59% for OE, 12.67% for CEI and 12.66% for TE.
Thus, I believe the recovery is overly generous.  It seems to me that it 
would be worth exploring a PECO-type solution here.  Under the settlement, it 
is highly unlikely that a competitive market will emerge in the next 8 years 
or that we will be able to compete. 

Janine 
---------------------- Forwarded by Janine Migden/DUB/EES on 04/15/2000 05:55 
PM ---------------------------

Janine Migden
04/12/2000 07:42 PM
To: Richard Shapiro/HOU/EES@EES, Harry Kingerski/HOU/EES@EES, Lara 
Leibman/HOU/EES@EES, Barbara A Hueter/DUB/EES@EES, James D 
Steffes/HOU/EES@EES, Kerry Stroup/DUB/EES@EES
cc:  
Subject: Ohio - A Bad Turn

	

In a rapid train sequence the First Energy case has completely derailed.  On 
Friday night, FE requested settlement talks on Tuesday and presented an offer 
to which we countered this morning.  FE then responded in a manner that has 
the industrials and the Consumers' Counsel ready to sign.  A stipulation is 
being sent out tonight with an agreement ready to be signed by many 
tommorrow.  The retail merchants are on the fence and are considering a deal 
with an FE subsidiary who supplies them gas and may cut them a deal on 
electric - this piece is confidential.  We are vociferously opposing it along 
with other marketers - except Shell.

Here's what FE offered:

For All Customers:
- Freeze on t&d rates til 12/31/07
- FE cover pancaking costs for imports through PJM and MISO
- Allow transmission customers to take point to point and allocate savings 
between customer and RTC recovery (maxed at 50%).
-Continuation of all rate reductions and rate freezes
- To "guarantee" that 20% of the load for each of the customer classes 
switches, FE will be at risk for $500 million, $250 million of which is 
allocated to residential and $250 million to c&I, divided by the 3 operating 
companies.
- Continue to support operational support task force and commitment to adhere 
to working group decisions and execute them.
-Date certain end to ctc recovery of 12/31/06 for OE, 6/30/07 for TE and 
12/31/08 for CEI except for changes in law,etc. and for amortization of 
deferrals associated with customer switching in excess of 20%.

For Residential Customers:
 -The ability to buy 8760 hour blocks of power at 60% load factor for 
$38.99/mwh and escalating each year.  520mw
to be made available.  FE affiliate limited to 100 MW of that power.
- Shopping credit of approximately $.045/kwh 

For Industrial Customers:
- The right to extend special contracts (approximately 800 customers) to the 
end of the ctc recovery period or abrogate contract, which is not likely 
given the shopping incentive)

What is amazing is that there may be a settlement of $6.9 billion over 2 days 
of talks and any attempt to talk stranded cost numbers was squelshed.

Tonight we are trying to rally all marketers and other possible allies to 
attend tommorrow.  The unknown is the Staff.  This is like swimming upstream 
after a hurricane, and unfortunately, I'm not a salmon.