Message-ID: <32849739.1075846658416.JavaMail.evans@thyme>
Date: Thu, 24 Feb 2000 05:10:00 -0800 (PST)
From: susan.scott@enron.com
To: lorraine.lindberg@enron.com
Subject: Duke
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X-From: Susan Scott
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Lorraine, I've been studying the El Paso/Dynegy reservation reduction 
mechanism (RRM).  Basically the deal was that Dynegy's minimum-pay obligation 
would be reduced by the amount of the fixed cost component of IT revenues 
generated by El Paso's transportation of IT volumes above a historical 
threshold.  (The parties based the threshold on El Paso's monthly IT volumes 
for the 12 months ended 9/30/97.)  The volumes in excess of the threshold 
were calculated and a ratio of the volumes in excess of the threshold to the 
total volumes was determined; the ratio would then be applied to the fixed 
cost component of all IT revenues and the resulting dollar value applied to 
Dynegy's monthly reservation charge, to the extent Dynegy had not met its 
minimum pay obligation for a particular month.

This provision of course met with heavy opposition; however, FERC allowed 
it.  FERC stated that while the RRM had anticompetitive effects because it 
created a disincentive for El Paso to discount IT, it was not unduly 
discriminatory.  The "unduly discriminatory" conclusion was based on an 
analysis on the potential effect on the Cal. gas transportation market -- the 
Commission found that due to relatively weak market demand, neither Dynegy 
nor El Paso appeared to have been able to influence prices because so much 
firm capacity was available.

I assume Russ may be after something similar to the RRM.  We would have to 
file it as a negotiated rate but I feel fairly confident that we could get 
FERC to accept it.  

That's my 2 cents worth on this particular issue...I'll come down around 3:30 
to chat with you more about the Duke (I have a conference call with MKM from 
1:30 to 3:30, which is why I'm camped out on 47).