Mike, this appears to be a very reasonable settlement - proceed on this
basis. I assume this keeps my number in and around the $600 to $615MM for
the 2000's all in.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 09/13/2000
03:27 PM ---------------------------

Mike J Miller
09/12/2000 01:55 PM
To: Dick Westfahl/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: (bcc: David W Delainey/HOU/ECT)
Subject:

Dick,

I have done some more research on the cost versus Peaker Fee issue. The
numbers from ENA's side lay out as follows:

ENA Payments vs. NEPCO Costs $4,449,000
ABB Breaker Costs/Estimate to Complete $ 720,000
Reduction in Variable Overheads $3,000,000
IDC on ENA Overpayments $ 200,000
Fixed Overhead Charged to Variable $ 180,000
Westinghouse L.D.'s- Gleason $1,800,000
Westinghouse L.D.'s- Wheatland $ 500,000
Preliminary Total Reduction
in Project Costs $10,849,000

ENA Payments vs. NEPCO Costs: ENA paid according to pre-determined cash
curves every month. NEPCO's actual costs appear to be coming in about $4.5
MM less per the audit results that we both reviewed last Friday.

ABB Breaker Costs/Estimate to Complete: When we met last Friday, there were
$1,459,000 of Open P.O.'s and other items that NEPCO still needed to
investigate and closeout, you have a copy of the detailed schedule prepared
by Amy Spoede. Of the $1,459,000, there was $720,000 showing as still owing
to ABB for Circuit Breakers at Wilton Center. ABB has informed ENA that they
have been payed in full for quite some time, thus I believe that this
$720,000 is an accounting phantom that NEPCO needs to clear up.

Reduction in Variable Overheads: The $3,000,000 in variable overhead
reduction is the number that you offered to cut this cost in our meeting last
Friday.

IDC on ENA Overpayments: As part of our agreement with EE&CC/NEPCO, ENA
agreed to pay 2000 peaker construction costs based upon cash curves versus
actual invoices. The cash curves consistently overestimated NEPCO's actual
disbursements, even after quarterly audits and true-ups. NEPCO currently
owes ENA over $200,000 in IDC at the cost of capital charged by Enron Corp.

Fixed Overhead Charged to Variable: Some EE&CC/NEPCO personnel coded time
against variable overheads that should have been charged against the
pre-agreed fixed overheads.

Westinghouse L.D.'s: ENA paid Westinghouse directly for the turbines. ENA
has held back $3.5 MM of retainage pending resolution of L.D.'s.
EE&CC's/ENA's position is that Westinghouse owes $2.3 MM of L.D.'s ($1.8 MM @
Gleason, $0.5MM @ Wheatland). The aforementioned L.D.'s are for delivery and
schedule delays at Gleason and Wheatland. There is an additional $1.0-1.6 MM
of performance L.D.'s for missing heat rate guarantees at Gleason. ENA will
negotiate the performance L.D. settlement directly with Westinghouse because
the cure will be getting additional MW's in trade against the L.D.'s.
Otherwise, Westinghouse can cure by minor unit modifications and re-test
versus paying cash L.D.'s. However, the Delivery and Schedule L.D.'s will
still be negotiated by EE&CC.

Peaker Fee Settlement: Based on our last meeting and additional research, I
suggest the following path to quickly resolve the Peaker fee amount and
payment. If EE&CC will take over the risk/reward of the Delivery & Schedule
L.D. issue with Westinghouse, then ENA will recharacterize the amounts
detailed above as Peaker fee payment. If EE&CC is successful in keeping all
the Schedule L.D.'s from Westinghouse, then it would have a $10.85 MM fee
versus $9.2 MM. EE&CC only needs to keep $650,000 of the $2.3 MM of
Westinghouse Schedule L.D.'s to have a $9.2 MM fee.

Please let me know how you would like to proceed from here.

Regards,

Mike J Miller