Re: ECS and the $500k reduction

pls print--I'm sending you several docs on ECS--please give me in one stack.
DF
---------------------- Forwarded by Drew Fossum/ET&S/Enron on 04/10/2000
12:14 PM ---------------------------

Steven Harris
04/10/2000 10:41 AM
To: Drew Fossum/ET&S/Enron@ENRON
cc:

Subject: Re: ECS and the $500k reduction

FYI, for our meeting.
---------------------- Forwarded by Steven Harris/ET&S/Enron on 04/10/2000
10:40 AM ---------------------------

James Centilli
04/05/2000 10:02 AM
To: Rod Hayslett/FGT/Enron@ENRON
cc: David Foti/ET&S/Enron@ENRON, Steven Harris/ET&S/Enron@ENRON

Subject: Re: ECS and the $500k reduction

We did not document the up front payments, because of Regulatory concerns.
FERC requested copies of the contracts that defined the payment for
electricity. The $500k was negotiated in a meeting with George Fastuca and
Mark Courtney, where Mark agreed to share his profit. We had worked very
closely with them to assure the officer group, how this project compared to
doing it with out ESC. They never advised Dave Foti or myself of this
change. The calculations for the up front payment was provided by them and
clearly reflects the revenue sharing agreed to by Mark.

Rod Hayslett

04/05/2000 06:47 AM
To: David Foti/ET&S/Enron@ENRON
cc: Steve Harris/HOU/ECT@ECT, James Centilli/ET&S/Enron@ENRON

Subject: Re: ECS and the $500k reduction

Did we have a contract that was written and spelled out? If not, (pretty
sloppy business practice), then we are just going to have to tell Bill Cordes
that we didn't have a deal, and someone is going to have to suck it in to
make up the $500K. If we did, what does the deal say?

David Foti
04/04/2000 05:45 PM
To: Rod Hayslett/FGT/Enron@ENRON, Steve Harris/HOU/ECT@ECT, James
Centilli/ET&S/Enron@ENRON
cc:

Subject: ECS and the $500k reduction

Rod, Steve, & James:

In rough terms, this is what I understand ECS' logic to be -

The $3.35 per KW for transmission demand charge was assumed not to be
avoidable and have a 5000 KW minimum when ET&S and ECS agreed on the $2.8MM
one time payment.
ECS says that they have negotiated to make the transmission demand charge
avoidable with no minimum.
$3.35 * 10,000HP / 1.341 = $25k
$25k discounted 10 years = $1.9MM
25% of 1.9MM = approx. $500k
Original one time payment = $2.8MM less $0.5MM = $2.3MM (the new payment ECS
wants to give ET&S)

ECS contends that Fastuca agreed to a 25% sharing of benefits received from
the avoidable demand. My recollection is that the 25% was used as a
benchmark to estimate ECS' fee but was never established as a firm rule.

ECS is supposed to provide us with their own written explanation for the
$500k reduction. They are also supposed to send us the "re-negotiated" rate
schedule 21 that shows the transmission demand charge becoming avoidable.

In any event, whether it is reasonable or not that ECS is due the $500k, it
is reasonable to expect that ET&S would have been notified of this change in
a more timely manner.

Dave Foti
x.31978