Message-ID: <26803133.1075844237251.JavaMail.evans@thyme> Date: Mon, 7 May 2001 06:48:00 -0700 (PDT) From: janine.migden@enron.com To: scott.gahn@enron.com, jeff.ader@enron.com, edward.baughman@enron.com, james.steffes@enron.com, eric.letke@enron.com, harry.kingerski@enron.com, marc.ulrich@enron.com, charles.decker@enron.com, james.lewis@enron.com, guy.sharfman@enron.com, roy.boston@enron.com, susan.landwehr@enron.com, mark.bernstein@enron.com, daniel.allegretti@enron.com, mike.roan@enron.com, scott.stoness@enron.com, neil.bresnan@enron.com, don.black@enron.com, christi.nicolay@enron.com, ron.mcnamara@enron.com, ress.young@enron.com, suzanne.rhodes@enron.com Subject: Com Ed Strategy Cc: richard.shapiro@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: richard.shapiro@enron.com X-From: Janine Migden X-To: Scott Gahn, Jeff Ader, Edward D Baughman, James D Steffes, Eric Letke, Harry Kingerski, Marc Ulrich, Charles Decker, James W Lewis, Guy Sharfman, Roy Boston, Susan M Landwehr, Mark Bernstein, Daniel Allegretti, Mike Roan, Scott Stoness, Neil Bresnan, Don Black, Christi L Nicolay, Ron McNamara, Ress Young, Suzanne Rhodes X-cc: Richard Shapiro X-bcc: X-Folder: \Richard_Shapiro_June2001\Notes Folders\Discussion threads X-Origin: SHAPIRO-R X-FileName: rshapiro.nsf Based on a series of meetings and discussions with many you, below is an outline of the proposed strategy for Com Ed. I will be meeting with Commissioner Harvill and also the Commissioners' assistants on Wednesday to deliver our message, so if you have any comments on this, please get back to me as soon as possible. (Com Ed is scheduled to meet with the Commissioners on Thursday). The Facts - Customers currently have three rates to choose from: the fixed price bundled rate, the PPO which is a discount off the Fixed price bundled rate, or an alternative rate provided by a marketer (ARES). Most of Enron's customers are on the PPO although some are on the bundled rate. Com Ed sent a letter to the ICC in which they propose to replace the PPO with a spot market price plus adder to be effective at the end of 2004. Com Ed also acknowledges that with rising market prices, some of the industrial customers are or soon will no longer be paying a CTC. With the relinquishment of the CTC obligation comes Com Ed's obligation to provide the PPO rate. In conversations, Com Ed indicated that they would like to replace the fixed bundled price with a performance based rate at the end of 2004. An internal analysis prepared by Mark Ulrich sets forth the negative impact of removing the PPO on our current book of business. Issues of Concern: * Protection of our current book of business * Ability to physically deliver into Com Ed on a competitive basis * Potential for Default Service deal * Potential to market individual customers on a one-on-one basis The Plan: Our public position will be that without the capability to physically deliver power into the Com Ed market on a competitive basis, the PPO rate should not be lifted since customers are left without reasonable options or protection. Our negotiated position in order of priority is as follows: 1. Protect our current book of business. We should negotiate a rate with Com Ed that leaves us whole. This could include the provision by Com Ed of ancilliary services. There is an FRP tariff rate that has expired but that we believe offered ancilliary services at a rate that allowed other marketers to physically deliver. We are in the process of obtaining the tariff to see if that would work for us to negotiate from, even though it has expired. In essence we want to negotiate a new PPO rate under which Com Ed continues to supply our existing customers or preferably that enables us to physically deliver to our customers at the same price as the PPO. Mark Ulrich and Guy Sharfman are going to develop a rate that we can take to Com Ed for our entire book of business. 2. Leverage new business opportunities for EES. These opportunites include acquisition of all or a portion of Com Ed's industrial default customers as well as individual customer accounts. (We believe that Com Ed wants to free itself from its obligation to serve industrial customers, so there may be an opportunity). The concept is to fold these new customer acquisitions into the same deal negotiated for our current customers, allowing EES to expand its customer base and potentially its physical delivery capabilities. From the standpoint of acquiring individual customers, we should advocate a real time price plus adder starting in 2003 for customers who roll off the CTC. 3. Push for Com Ed support of Enron's positions at the ARTO working level. Nothing in our agreements, however, with Com Ed should be contingent on the RTO functioning, such that Com Ed can have an out for its obligations to Enron under the deal. Janine.