Message-ID: <28888473.1075859513573.JavaMail.evans@thyme> Date: Mon, 29 Nov 1999 01:49:00 -0800 (PST) From: elizabeth.sager@enron.com To: mark.haedicke@enron.com, jeffrey.hodge@enron.com Subject: Dow Jones Article re EEI Contract Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Elizabeth Sager X-To: Mark E Haedicke, Jeffrey T Hodge X-cc: X-bcc: X-Folder: \Elizabeth_Sager_Dec2000\Notes Folders\All documents X-Origin: Sager-E X-FileName: esager.nsf Article as per my voice mail. Thanks Elizabeth 36349 ---------------------- Forwarded by Elizabeth Sager/HOU/ECT on 11/29/99 09:47 AM --------------------------- From: Christi L Nicolay on 11/24/99 04:50 PM To: "Betsy Carr" @ ENRON cc: Elizabeth Sager/HOU/ECT@ECT, Mary Hain/HOU/ECT@ECT Subject: Re: Christi, this is generating a lot of interest! Elizabeth Sager has been working on the EEI contract for Enron. "Betsy Carr" on 11/24/99 03:48:07 PM To: Christi L Nicolay/HOU/ECT@ECT cc: Subject: Christi, this is generating a lot of interest! Christi, this is generating a lot of interest! > By Mark Golden > > A Dow Jones Newswires Column > > NEW YORK (Dow Jones)--"Et tu, Sonnet?" > > The Edison Electric Institute unveiled Wednesday a standardized master > agreement for trading power, but there's already a standard contract > - the one written by the Western Systems Power Pool. > > There are several ways to characterize this battle: East versus West; > power > marketers versus utilities; and, even, Southern Co. versus > Southern Co. A power struggle has begun, despite the fact that most > traders, preschedulers and trading managers aren't even aware of the > new contract. > > Southern Co. (SO) Vice President Bobby Campo has been a leader in WSPP > since the organization's inception and has been chairman of its > contract committee for four years. Yet Southern Co. Energy Marketing's > chief counsel, Sonnet Edmonds, is a leader in the rival-contract > faction. > > Will EEI, along with its comrade, the National Energy Marketers > Association, manage to dethrone the WSPP contract or crash? WSPP's > raison d'etre is to manage and promote use of its contract, which is > traded > extensively in the West and has gained proponents in the East. > > "I'm not real excited about it right now," Campo said of the new > contract. > "The EEI contract is being done by contract people and lawyers. > We - operators and power marketers - worked on our contract for years > before we brought in the lawyers. It (the new contract) may die from a > lack of interest from participants, but EEI has the ability to keep it > alive." > > It isn't clear if the big power marketing companies will get the ball > rolling by asking counterparties to switch to the EEI contract. Edmonds > hopes that Southern Co. will do so. > > "Management hasn't given the official word yet, but we participated in > its > development, so I imagine we'll use it at some point," she said. > > Enron Corp.'s (ENE) general counsel also worked on the EEI contract, but > the company hasn't made a decision to actually use it. > > Entergy Corp.'s (ETR) general counsel, Christopher Bernard, led the > effort > to develop the new contract as head of NEM's standardized > contract committee. But Entergy's Jim Kenney is chairman of WSPP's > executive committee. Entergy's power trading managers, meanwhile, > haven't even read the new contract yet. > > Duke Power Co. (DUK), an NEM member, is looking at it, a spokesman said. > Enron and Southern Co. aren't NEM members, though they > serve on its contract committee. > > Several sources said American Electric Power (AEP) has agreed to be the > guinea pig, and plans to switch to the EEI contract with > counterparties on eastern U.S. trades. A spokesman for the utility > couldn't > confirm or deny that rumor because Paul Addis, president of AEP > Energy Services, has imposed a vow of silence on AEP's traders. > > There are elements of the EEI contract that power marketers may like. One > innovation is a new product called "Firm (No Force Majeure)," > which requires the payment of liquidated damages for failure to deliver - > no excuses, no force majeure, just send a check. > > The new contract also has two other firm products. "Firm (Liquidated > Damages)" is closest to the WSPP firm product, but it defines force > majeure more strictly than WSPP. "Firm (LD-System Reliability)" > explicitly > allows a selling utility to curtail deliveries without paying liquidated > damages if necessary to maintain native load. Of particular interest to > traders of eastern U.S. electricity is the fact that the EEI contract > defines what an "into" product is. > > WSPP has debated the introduction of such products, but in the end has > tried to come up with a single, agreed-upon product for trading. > > "EEI has created a lot of different types of firm products, but that can > create problems. Many people have said 'no, we want one firm > product'," said WSPP's counsel, Michael Small, of Washington, D.C., law > firm Wright and Talisman. > > So why didn't the EEI group just work with WSPP to get changes made to > the > existing standard? Too much bureaucracy, according to > Southern's Edmonds. > > "Changes to the WSPP contract require approval from 90% of the members, > after working through the operations committee and the > executive committee. Then the changes have to be filed at Federal Energy > Regulatory Commission," Edmonds said. > > Coincidentally, WSPP's executive committee is meeting Friday in San Diego > to discuss what changes are needed in the definition of its firm > product. Western utilities are pushing hard for "firm" to mean backed up > by > reserves of generating assets or previously purchased power. In > other words, some utilities want to eliminate short positions from power > markets. > > At least one power marketing company, which didn't want to be named, will > switch to the EEI contract if that change gets made to WSPP. > > For the EEI contract to fly, not only will the lawyers at the big trading > companies need to make it their companies' standard, but traders will > have to convince utilities to abandon most, if not all, force majeure > claims. Many municipal utilities and rural electric cooperatives are > forbidden to do so by state regulations. > > For traders, though, the biggest adjustment to make if the EEI contract > does take off will be more social than professional. The semi-annual > meeting of the WSPP's operations committee is as much fun as any blatant > boondoggle should be. The serious work of a handful of > committee members is a small hook on which hangs the revelry of hundreds > of > power marketers, brokers and utility staffers. As it stands, > non-committee members must have a hard time convincing bosses that their > presence is necessary at the meeting. > > How on earth will traders justify going if the WSPP contract is no longer > used? Can EEI throw a good party? And how will the Gucci-loafered > EEI executives from Washington handle $1,000 dares to go naked in a bar? > > Such are the questions now vexing America's electric utilities. > > -By Mark Golden; Dow Jones Newswires; 201-938-4604; > mark.golden@dowjones.com > > Copyright (c) 1999, Dow Jones & Company Inc