Subject: Re: 7-101 Petition re Master Sales Agreement
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked]
Date: Tue, 29 Aug 2000 11:10:00 -0700 (PDT)

I'm far afield of my area of expertise, but Boyd's comments make a great deal 
of sense to me.  Gregg, did you/will you pass these along to PERC?  Perhaps 
it would help if Boyd could speak directly to the PERC person with the 
typewriter, so to speak.

Kay

"Boyd J. Springer" <[email-masked]> on 08/28/2000 09:10:10 
AM
To: [email-masked]
cc: [email-masked] 

Subject: 7-101 Petition re Master Sales Agreement

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These are my comments re the draft Petition forwarded by Peoples on Friday:
(1) The Petition describes PERC in paragraph and refers to PERC in par. 3.
PERC, however, is not a party to the Master Agreement, and the Petition
does not discuss request any relief with respect to PERC. I don't see why
there is a need to reference PERC. (2) It is my understanding that, under
the Master Agreement, there will be two types of transactions: (a) simple
buy/sells at a clear market price; and (b) complex transactions with
sharing arrangements, management fees and similar structures. As we have
discussed, the first type of transaction, simple buy/sells at a market
price fall under an exemption to Section 7-101's approval requirement (220
ILCS 5/7-101(4)). These types of transactions do  not require ICC approval
and MEH/Peoples are free to engage in such transaction now. I would suggest
that the Petition point this out, particularly if (as I suspect is the
case) MEH and Peoples are now conducting such transactions or may wish to
do so before the ICC acts on the Master Agreement. Because the Master
Agreement covers certain transaction which need approval and other which do
not, I would suggest that the Petition make this clear and request approval
only "to the extent required". (This was the language used by NIGAS in
seeking approval of a buy/sell agreement in Docket 95-0302.) (3) With
respect to the transactions which do require approval (the complex ones
with sharing arrangements, management fees and similar structures), the
draft Petition doesn't say much. It says (Par. 5) that transactions under
the Agreement will optimize the use of the gas supply and capacity assets
of Peoples and MEH; (Par. 9) that Peoples has similar master contracts with
non-affiliated entities; (par. 10) that the agreement will not interfere
with Peoples' operations; and (par. 10) that the Agreement is in the best
interest of Peoples and its customers. All of these statements are fine to
include, but the ICC is likely to want to know more about why the agreement
is in the public interest. Perhaps a sentence or two could explain how the
Agreement will optimize Peoples' use of its gas supply and capacity assets
(e.g., by using capacity which otherwise would be idle) and how this will
benefit Peoples' Illinois ratepayers (e.g., a credit to PGA gas costs).
Also, Peoples is asking that the ICC pre-approve an arrangement under which
the "details" of individual transactions will be filled in later. As I
understand it, the "details" will include such things as the level of
management fees and other compensation terms. To facilitate approval, it
would be best to have some sort of guideline to suggest to the ICC, i.e., a
management fee within a certain amount or percentage of a specified index
level. If there is an industry standard approach that could be referenced,
that may be of use. The Petition suggests that there are other Agreements
of this type with non-affiliates. Perhaps reference could be made to
pricing provisions under one or more of those agreements. If it is not
possible to be any more specific, I am concerned that the ICC may want to
wait and review individual transaction rather than giving blanket approval
without knowing more. (4) The ICC approval process can take 4-5 months
(sometimes more) to complete. The required approval time, however, can be
cut down significantly when the apprval filing includes a Peition and
supporting testimony that lays out all the information needed to conclude
that a proposed arrangement is in the public interest (the interest of
Illinois ratepayers). The Petition itself need not include all the details
(it need only lay out the case ingeneral terms). A filing package which,
with accompanying testimony, tells the full story will expedite the
approval process.