Message-ID: <29331291.1075852485431.JavaMail.evans@thyme> Date: Mon, 22 Oct 2001 13:01:11 -0700 (PDT) From: roy.boston@enron.com To: victor.munoz@enron.com Subject: Ada Plant Negotiation Cc: janine.migden@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable Bcc: janine.migden@enron.com X-From: Boston, Roy X-To: Munoz, Victor X-cc: Migden, Janine , jsteffe@enron.com X-bcc: X-Folder: \JSTEFFE (Non-Privileged)\Steffes, James D.\Deleted Items X-Origin: Steffes-J X-FileName: JSTEFFE (Non-Privileged).pst Victor -- This is just a brief note to memorialize our earlier conversation= today. You had asked me whether there were any regulatory impediments to = Enron renegotiating the Ada contract with Consumers so as to increase the v= alue of the deal to our mutual benefit. Specifically, you inquired whether= changing the PPA to permit us to source the power used to comply with tour= obligations under the contract from the market. The changes you recommend= to make to the PPA would not change the rate paid by Consumers but rather,= the sourcing requirement.=20 =09 My preliminary assessment is that such PPA changes would not need to be= filed for approval at the PSC. I have several reasons why the above mentioned changes would likely not hav= e to be approved by the Commission. First, rate increases must be subject= to hearings and approval by the Commission. Consumers has a frozen purcha= sed power/fuel adjustment clause and any changes in its contracts could not= be passed on to customers during the term for which that rate is frozen. S= ince the rate could not increase, there would be no chance to pass through = to customers a rate increase hence, no requirement to seek approval. Moreo= ver, after Consumers' fuel/purchased power adjustment clause is reinstated= , we could reneotiate the contract downwards and pass on a small savings (a= gain, a rate decrease)to customers and we and Consumers could split the lio= n's share of the savings revenue. Lastly, but more significantly, the Mich= igan law that pertains to utilities recovering QF costs through rates only = provides authority to the Commission to review PPA changes if the costs for= power and energy increase. Our proposed changes are not likely to be deem= ed to be a rate increase. Generally an unchanged rate for a service with a= declining quality of service ( e.g., a firm transport service changed to a= n interruptible service at the same rate)could be construed as a rate incre= ase thus triggering the Commission's authority. Our proposal is quite diff= erent from that instance because, as I understand it, the change we propose= would only affect our power sourcing ability and that Consumers would rema= in able to call on the Ada unit's capacity at all times if needed. If chan= ged as described, Consumers will receive the full quality and quantity of s= ervice for which it contracted under the PPA so its rights seem undisturbed= . The only change we seek is for Enron to have an option for power sourcin= g, which should be "invisible" to Consumers -- except for the check we pro= vide them as inducement. I look forward to meeting with you Friday of this week to discuss this matt= er more fully.