Message-ID: <25988492.1075862219587.JavaMail.evans@thyme>
Date: Sat, 3 Nov 2001 13:52:09 -0800 (PST)
From: richard.shapiro@enron.com
To: jimmie.williams@enron.com
Subject: Illinois Power(IP) and California refund obligation
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Here are general answers to the issues we discussed:
     1)Provider of Last resort: IP retains an obligation to be the provider=
 of last resort(POLR) until the end of the transition period( which is the =
period during which stranded costs are recovered)....the transition period =
end 12/31/06. 2007 and beyond relative to POLR obligation is an unknown. Ho=
w IP will fill this obligation beyond 2004, when it's "clawback" contracts =
to IP's generation and Clinton expire is unknown...Dynegy should be able to=
 answer. Based on my review and understanding of the statute(restructuring)=
, Dynegy has little chance of a material risk developing relative to the PO=
LR obligation. 2) Stranded cost recovery: Competition Transition Charges or=
 stranded  costs are recoverable by IP through 12/31/06( Dynegy does have a=
n ROE cap through 2004...it is equal to the treasury bond yield plus 850 ba=
sis points). The level of transition charges varies periodically, as the ma=
rket price calculation varies( I can explain this later, but it is not part=
icularly important). Bottom line: IP has almost zero risk of achieving less=
 than 100% recovery of stranded costs.3) Distribution and Transmission  rat=
e risk: I won't go into any detail, but there is less risk of achieving les=
s than  a compensatory  on T&D assets in Illinois than in any other state i=
n the country. 4) California refund amount for Dynegy: Intuitively and base=
d on what I know, $530 million exposure should be West Coast Power's max ex=
posure, so roughly $265 million for Dynegy...but, I wouldn't take this to t=
he bank unless I fully understood the joint venture's documentation. 5)DWR =
renegotiation risk: Coming shortly under separate e-mail will be analysis o=
f DWR contracts- note that Dynegy contracts(2) are $2.2 billion in the mone=
y as of time of analysis....Don't know how to allocate between Dynegy and N=
RG...would have to better understand contractual relationships.
     Please feel free to call me at 281-831-3749 if you need anything else