Message-ID: <26470030.1075851729011.JavaMail.evans@thyme> Date: Wed, 21 Mar 2001 04:46:00 -0800 (PST) From: ruth.concannon@enron.com To: kevin.heal@enron.com Subject: TransCanada Shipper Settlement -- Impact to Sithe/Independence Restructuring Cc: rob.milnthorp@enron.com, frank.vickers@enron.com, hunter.shively@enron.com, eric.ledain@enron.com, martin.cuilla@enron.com, geoff.storey@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: rob.milnthorp@enron.com, frank.vickers@enron.com, hunter.shively@enron.com, eric.ledain@enron.com, martin.cuilla@enron.com, geoff.storey@enron.com X-From: Ruth Concannon X-To: Kevin Heal X-cc: Rob Milnthorp, Frank W Vickers, Hunter S Shively, Eric LeDain, Martin Cuilla, Geoff Storey X-bcc: X-Folder: \Geoffrey_Storey_Nov2001\Notes Folders\All documents X-Origin: STOREY-G X-FileName: gstorey.nsf 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