Re: TCPL and Stakeholders Closer to Partial Settlement

What is the AOS? How does it work?
The details have not yet been agreed. TCPL is proposing AOS of 2.5% of firm
entitlement that would be credited to an IT bill. This means you would have
to have IT services in any month to access the credit but it is not limited
to your FT path. Some shippers are still insisting on a separate class of
service on the FT nomination. Due to system development constraints I expect
either TCPL's proposal to go through or the whole concept is scrapped.

IT Floor - how do you calculate the marginal fuel cost?
That is still to be worked out but TCPL's position is to publish an Empress
to Parkway marginal fuel toll updated monthly for changes in Empress MI.

No ability to negotiate services or discount?
That is correct. There is no appetite for negotiated services amongst the
LDCs, CAPP and the larger producers. Marketers and IPPs are much more
receptive.

Kevin

Geoff Storey
02/10/2001 09:34 PM
To: Kevin Heal/CAL/ECT@ECT
cc:
Subject: Re: TCPL and Stakeholders Closer to Partial Settlement

What is the AOS? How does it work?
IT Floor - how do you calculate the marginal fuel cost?
No ability to negotiate services or discount?

Give me a call if you want 713-853-7058

Geof

To: Rob Milnthorp/CAL/ECT@ECT, Robert Hemstock/CAL/ECT@ECT, Eric
LeDain/CAL/ECT@ECT, Peggy Hedstrom/CAL/ECT@ECT, Jonathan McKay/CAL/ECT@ECT,
Jeff Pearson/CAL/ECT@ECT, Ruth Concannon/HOU/ECT@ECT, Martin
Cuilla/HOU/ECT@ECT, Geoff Storey/HOU/ECT@ECT, Michael Cowan/CAL/ECT@ECT,
Chris Lambie/CAL/ECT@ECT
cc:
Subject: TCPL and Stakeholders Closer to Partial Settlement

TCPL and the Stakeholders have been meeting regularly since January and are
close to a partial two year toll settlement along the following lines
acceptable to TCPL:

Cost of Capital and ROE - to be litigated in NEB Rate Hearing
Operations, Maintenance and Administration Costs - 2001 = $223M 2002 =
$216.5M
Depreciation - 2001 2.76% (increase of 0.1%) 2002 = 2.91% (approx $60M
over two years)
Authorized Overrun Service of 2.5% of FT credited to IT services
Employee Severance costs amortized over 3 years
Revenue Sharing to be capped at $5M
New Services to be tariffed and run through expedited Tolls Task Force
Process. If opposed at TTF, sponsors can file application with NEB.
IT Floor = greater of 80% of FT toll or sum of incremental marginal fuel cost
pus FT Commodity toll plus 5% of daily FT demand toll
STFT - status quo
AECO/ANR Storage - TCPL commitment to review monetization and disposition
options on 8 bcf this year

In terms of an Eastern Zone toll and prior to taking into account any
increase for higher cost of capital, this represents about CDN$1.10/GJ in
2001 and $1.15 in 2002 (assuming discretionary revenue of $40M/year).

Going around the table most stakeholders, including the LDCs and CAPP gave it
unenthusiastic support although IGUA and Centra Man indicated they have
strong problems with AOS if it is run as a credit to IT services. El Paso
and PGE were non-commital and may end up opposed. Representing Enron, I
expressed concern about the lack of clarity around what marginal fuel costs
mean but indicated we would unlikely to be opposed (i.e prepared to litigate)
if it was otherwise widely supported.

TCPL is to draft agreement language for distribution next week.

Any questions let me know.

Kevin
403 974-6727