Subject: TransCanada Shipper Settlement -- Impact to Sithe/Independence Restructuring
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Wed, 21 Mar 2001 04:46:00 -0800 (PST)

As we discussed yesterday, the TCPL Mainline Service and Pricing Settlement 
language
on the proposed Capacity Turnback Policy may be very important feature of the 
Settlement
if ENA ends up reducing its sale to the plant and is responsible for 
mitigating the cost of Sithe's
transportation upstream of Chippawa.  The other features such as FT Make-Up 
Credits and AOS
Credits on Sithe's transport will create new opportunities to generate 
incremental revenues for
ENA and Sithe.  The IT Floor Price  will directly impact the "death spiral" 
of future capacity 
decontracting and resulting increased demand charges for Sithe if the IT 
Floor is placed below
100% of firm tolls.  

Here are some additional comments and questions on the draft language on 
TCPL's 
Turnback Policy:

1) Policy is good only through December 31, 2002, the ending date of the 
Settlement.
 There are a couple pipeline expansions (i.e. Iroquois' Eastchester and a 
rumored
 alternative to the Canadian portion of Millenium) that have a Fall 2003 
in-service
 date.  Will TCPL's "queue" for new capacity kick-off the Turnback Policy?  
Is there
 a requirement that TCPL's upstream capacity match up with takeaway capacity 
in
 the U.S., for example Iroquois's 230,000 dth/d Eastchester project.  Sithe's 
capacity
 may only partially prevent an additional expansion from Dawn to Waddington.
 Sithe's capacity, however, would have higher value if the rumored Dawn to 
Niagara
 expansion alternative to Millenium becomes a reality.  Can the language be 
clarified
 so that we don't lose out on turning back Sithe's capacity if an expansion 
project
 does not quite hit the deadline of December 31, 2002?

2) Requests for Turnback to be only posted on TCPL's bulletin board.  Can 
TCPL be
 required to make a written notification to all FT shippers?  What will be 
the minimum
 amount of time that shipper will have to prepare turnback bids?  Several 
weeks to 
 a month is typical for U.S. pipelines and can occur simultaneously during 
the Open
 Season for the expansions.

3) Existing FT shippers along the path on the Mainline System being expanded 
may
 offer to turnback all, or a portion of, their FT contracts.  What criteria 
and who 
 determines the path to be expanded?  If a downstream expansion project is for
 10 years, what if TCPL only needs to expand for the first couple of years 
and then
 there is more turnback?  It just seems that there is so much TCPL discretion 
on the
 bid and evaluation process?  Could some guidelines or goals established ahead
 of time, in addition to the highest NPV process, that would direct how some 
of these
 decisions are made?

4) FT Shippers can turnback capacity on a permanent or temporary basis.  Is 
this 
 the approach that TCPL is proposing to handle that capacity is only needed 
for  
 say 10 years to match up with Iroquois' Eastchester project?  In the U.S. 
shippers
 have ROFR rights to extend their contract after the initial term.  Is 
turnback capacity
 and the evaluation process that TCPL is proposing considering extending 
contracts
 beyond the primary term?

5) Turnback premiums and turnback discounts.  I believe the goal should be 
that
 Shipper's such as Sithe, who have the longest contract term on TCPL's shipper
 list, are protected from any increased rate base that will lead to higher 
prices in
 the future if the entire pipeline is not fully contracted.  This is an 
optimization step
 that needs to be included during the bid evaluations.  I am not clear whether
 the proposed NPV approach and the Policy Item #7 fully protects long-term 
 shippers?

6) During the NPV evaluation, are 100% tolls used or just the reservation 
charges?

7) The valuation of the NPV cost of new Facilities and/or "Transportation by 
Others"
 capacity to meet new service reuirements.  Sithe's St. Clair to Chippawa 
transport
 is already a "TBO" capacity contract from Dawn to Chippawa.  Could the 
wording
 be changed in the evaluation formula so that TCPL considers the net cost 
impact
 to the TCPL. on the net facility impact, rather than just any new savings in 
"TBO" 
 capacity costs?  

8) All turnback costs and revenues will be recorded in a Flow-Through Deferral
 Account.   Will remaining firm shippers see all the benefit or the cost from 
how
 this account will be applied in the next subsequent Test Year?

If you have any questions, please call me at x31667,

Ruth