Re: Market Opening

FYI - Paul agreed with my suggestions.
----- Forwarded by Aleck Dadson/TOR/ECT on 06/22/2001 05:27 PM -----

Aleck Dadson
06/22/2001 05:03 PM

To: Rob Milnthorp/ENRON@enronXgate@ENRON
cc: Garrett Tripp/TOR/ECT@ECT@ENRON, Paul Devries/TOR/ECT@ECT@ENRON
Subject: Re: Market Opening

With respect to point 1 in your memo, my sense is that the counterparty
would have to be either OPG or OEFC. In my view, the concept would not/could
not go forward and be implemented unless it had the support of OPG. The
question we should talk through is how do we best try to get that support
from OPG. With respect to point 2, I
think we should be careful about being too encouraged by Wilson's
/Purchase's comments to Lay/Lavorato on June 19 that if positive reports are
delivered by the IMO and OEB in September, the gov't will be hard pressed
not to move forward. My concern is that Wilson and Purchase may feel
comfortable saying this precisely because they are expecting a negative
report from the OEB (or at least one that they can interpret as being
negative). I agree with you that the likelihood of the IMO delivering a
positive report is very good. The likelihood of a positive report from the
OEB is far less certain. The key issues at the OEB/retail level are EBT, LDC
access to the data they need from HydroOne, completion of LDC CIS systems,
the gov't's interest in an industry resolution of customer duplications
prior to market opening in order to avoid mass confusion in the initial
period of the market, the state of customer education, and a contingency
plan to accommodate those who are not ready. -
with respect to EBT, I think the best we can do is get onside quickly with
our EBT hub of choice and work with them on perceived difficulties with
LDCs, etc. Ellis, Marryott and I are going to make a recommendation to Paul
next week on our preferred EBT hub. -with respect to
the info from HydroOne, I have already raised this issue with the OEB and
the IMO. The OEB and the IMO subsequently met with HydroOne and the MEA in
an effort to resolve this issue. My understanding, until yesterday's
discussion with Conway, was that the issue was resolved and the information
was now flowing to the LDCs. Paul, Garrett and I are meeting senior HydroOne
execs (including Rod Taylor) on Monday re resource adequacy issues and
we can press this with them as well. - with
respect to the CIS issue, there is not much we can do since most LDCs
already have a CIS vendor; but my understanding is that at least one CIS
vendor has backed out of its commitments to a number of LDCs recently (per
David MacFadden) and perhaps we can get a vendor to move in quickly to fill
that gap. I will raise this with Marryott to see what may be feasible at this
stage. - with respect to the customer duplication
issue, I have already met with the senior people at Direct (last week) to
discuss this issue with them and to propose a resolution that would see the
retailers involved retaining a third party (such as E&Y) to assess the
degree of overlap and whether there was an acceptable solution to any
problem. Direct is convinced that the degree of duplication is not high.
Direct is talking to Onsource and Toronto about this. I am checking with
our staff in the UK about whether there was a similar issue when the UK
market opened and, if so, how it was resolved.
. -with respect to customer education, I
and Dick Perdue (Direct's advisor) have contacted TransAlta, OPG, HydroOne,
Onsource, Enersource, and Toronto about funding a Province- wide consumer
education initiative over the summer. We are meeting next week to discuss
this idea further. This could require a financial commitment from Enron
of up to $200,000. - with respect to the
contingency plan to deal with those LDCs who are not ready, the OEB is
already on side in recognizing the need for a contingency plan - it will
likely be very simple: the IMO would send a bill to the LDC each month and
the LDC would bill customers at some fixed rate, with a deferral account).
The key issue will be how many LDCs (in terms of numbers and size) are not
ready and what is the minimum number of LDCs that the OEB/gov't is looking
for to be ready. This is an issue we will have to talk to the MEST about as
well as the OEB , since ultimately the decision of whether enough LDCs are
ready will be a political one. These are the
OEB/retail focussed things we are doing. On the larger political front, I
have several ideas about some things I would like to do that I can discuss
with you and Paul.

Rob Milnthorp/ENRON@enronXgate
06/22/2001 11:13 AM

To: Paul Devries/TOR/ECT@ECT, Garrett Tripp/TOR/ECT@ECT
cc: Aleck Dadson/TOR/ECT@ECT
Subject: Market Opening

Garrett/Paul - Can you guys work with the North East desk to price out a
500MW option at the New York/Ontario intertie as an insurance policy for the
Ontario government re market opening. You will recall that this was something
we had suggested a while back and didnt receive much support. However,
following Lavorato's meeting with Harris, Lavo is adamant that we send a term
sheet to Harris directly outlining both an call option structure and a swap
structure.

Second, it is quite apparant to me that everything hinges on the September
readiness report. If its favorable, I think there is a good chance of a fall
market opening. With that said however, we are in the hands of the IMO and
the OEB. I'm comfortable that we can continue to influence the IMO to produce
a favorable announcement but I dont know what we can do to ensure that the
OEB says its ready. Any suggestions, comments? I dont want to be in a
position that one LDC could halt market opening.

Regards
Rob