Message-ID: <14176992.1075845818633.JavaMail.evans@thyme> Date: Sun, 4 Mar 2001 23:29:00 -0800 (PST) From: lloyd.will@enron.com To: reagan.rorschach@enron.com, ozzie.pagan@enron.com, kay.mann@enron.com, jim.homco@enron.com, keith.comeaux@enron.com Subject: meam Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Lloyd Will X-To: Reagan Rorschach, Ozzie Pagan, Kay Mann, Jim Homco, Keith Comeaux X-cc: X-bcc: X-Folder: \Kay_Mann_June2001_2\Notes Folders\Discussion threads X-Origin: MANN-K X-FileName: kmann.nsf fyi. ---------------------- Forwarded by Lloyd Will/HOU/ECT on 03/05/2001 07:28 = AM=20 --------------------------- "will lloyd" on 03/04/2001 08:12:37 PM To: cc: =20 Subject: meam Delta Development =09 =09 =09February, 1999 Issue =09 =09Meam dispute reflects more issues than money =20 =09 =09BY NANCY cotten HIRST =20 =09Contributing Editor, Delta Business Journal =09=20 =09 =09On the surface, the dispute between the Municipal Energy Agency of =20 Mississippi (MEAM) and the Clarksdale/Yazoo City alliance appears to be =20 about money and contracts. Yazoo City and Clarksdale say they are pulling = =20 out of the eight-city energy-supply association because they can provide = =20 power to their cities less expensively on their own. =09 =09MEAM says that they have the right to do this, but only in accordance w= ith=20 the original MEAM contract, which specifies that an entity can only withdr= aw=20 from the agency on condition of five years=01, written notice. This provis= ion=20 is typical of this type contract and lends a degree of stability to a=20 coalition of political bodies. =09 =09Complicating the matter is the fact the MEAM has financed the upgrading = of=20 the generating facilities at Yazoo City and Clarksdale. The total project= =20 upgraded three frame-five gas turbines and added three waste heat recovery= =20 steam generators and cost in excess of $10 million. Part of this project w= as=20 paid for by MEAM revenues and the rest by a $5 million 1994 bond issue. =09 =09The Greenwood generating facility was also part of this project, but =20 Greenwood elected to pay out of other resources rather than participate in = =20 the bond issue. This leaves seven cities responsible for the bond issue an= d=20 dependent on the generating capacity of the two cities for a portion of=20 their electrical power supply. =09 =09MEAM also purchases power from other resources to supplement the genera= ting=20 capacity of Yazoo City, Clarksdale and Greenwood. SEPA, Cajun Electric=20 Cooperative, Oklahoma Gas and Electric and Entergy Services, Inc. are amon= g=20 recent suppliers with Entergy holding the largest contracts. =09 =09The exit of Yazoo City and Clarksdale from MEAM would hurt the organiza= tion=20 not only in loss of generating power but also in the loss of volume=20 purchasing power from other supplies. This type loss is one of the reasons= =20 for a five-year notice in the original contract. The other cities involved= =20 in MEAM would be given time to deal with the adverse impact. =09 =09Clarksdale and Yazoo City, however, say that MEAM has broken its contra= ct=20 with them. The two cities plan to form their own alliance to take advantag= e=20 of the savings that they perceive to be available in the deregulated=20 wholesale energy market. They also plan to buy out the bond issue obligati= on=20 from MEAM and finance it through revenue bond issues of their own. =09 =09At this point the story breaks down into two other issues. One is a ver= y=20 legitimate difference in style of operation and management between MEAM an= d=20 the two cities. The other is a rather obvious problem with power, =20 personality and disgruntlement. =09 =09Neil Davis, General Manager for MEAM, admits to being conservative in h= is=20 management style. "I=01,m the first to say we=01,re not where we=01,d like = to be=20 costwise," Davis says, "but we know that we=01,ve controlled and lowered c= osts=20 over the years. We=01,re very competitive and have the lowest costs in the= area. =09 =09"Entergy views MEAM as a good wholesale customer and they do all they c= an to=20 work with us. We have a good track record with them. We are moving =20 cautiously. We=01,re not going to abandon a good relationship unless we are= =20 sure it will improve our circumstances. We look at the end of the year, no= t=20 each transaction," Davis continues. =09 =09"Entergy provides a load-following service that keeps the load balanced = and=20 has energy follow demand on an instantaneous basis. Our facilities are not= =20 equipped to do this. We know Entergy can and will do this and we don=01,t = have=20 the track record with other suppliers." =09 =09Bob Priest, General Manager of the Yazoo City Public Service Commission= , is=20 much more daring in his approach. "You have to take a risk from time to=20 time," he says. "MEAM hasn=01,t changed in the last ten years, and the uti= lity=20 industry has changed drastically." =09 =09Public Service and other officials from both Clarksdale and Yazoo City = are=20 furious about the new contract with ESI. Both cities would prefer not to d= o=20 business with Entergy at all, an attitude that has little or nothing to do= =20 with MEAM. Both parties admit that there have been divisive issues for thr= ee=20 or four years, but the recent contract seems to have been the straw that= =20 broke the camel=01,s back. =09 =09Sources who prefer to remain unnamed say that there are other problems. = =20 Various people are angry at staff for various personal reason. Others see = a=20 conflict of interest in Public Service professionals being on the Board, = =20 which was designed as a citizen review entity. They say it puts them in th= e=20 position of being able to review their own performance. Comments from peop= le=20 from the unhappy cities, including their attorney=01,s presentation to the= =20 Board, contain thinly veiled accusations of wrongdoing that border on =20 character assassination. =09 =09As accusations and recriminations fly, many in the Delta are disappoint= ed in=20 a situation that is likely to bring harm to all eight cities. If the citie= s=20 do successfully pull out of MEAM, it will be interesting to see if, as in= =20 Aesop=01,s fable, the hare or the tortoise wins the race. DBJ =09