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 15:46:00 -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