TW Options Pre-Filing Meetings With FERC Today ,
 fyi

---------------------- Forwarded by Jeffery Fawcett/ET&S/Enron on 10/05/2000 
09:21 AM ---------------------------


Shelley Corman
10/04/2000 10:57 PM
To: Mary Kay Miller/ET&S/Enron@ENRON, Drew Fossum/ET&S/Enron@ENRON, Susan 
Scott/ET&S/Enron@ENRON, Glen Hass/ET&S/Enron@ENRON, Jeffery 
Fawcett/ET&S/Enron@ENRON, Lee Ferrell/ET&S/Enron@Enron, Steven 
Harris/ET&S/Enron@ENRON
cc: "Nancy, Bagot" <nancy-bagot@starpower.net> 

Subject: TW Options Pre-Filing Meetings With FERC Today


I think we had really good meetings today with both FERC rates & policy 
staff.  Jeff and the whole team did an excellent job of drawing them into the 
discussion.  By the end of both sessions I thought that they seemed genuinely 
interested in the proposal and anxious to see the filing.  Mike Coleman went 
so far as to suggest that to the extent we can make the case the this will be 
a tool in the generation siting process, we would be helping his group with 
Chairman Hoecker's directive for staff to develop concepts to respond to the 
SW power crunch.   

Attendees
Rates/Tariff Group Attendees (OMTR Rates West):  Mike Coleman, Bob 
Petrocelli, John Carlson
Policy Group Attendees:  Ed Murrell,  Laurel Hyde, Kim Bruno, Kathleen Dias & 
Demi Pulas 

Things They Liked
Service/Rate Structure.  They seemed to like the fact that the underlying 
agreement is an FT and fact that the transaction remained subject to current 
rate provisions.
Open bidding for shipper calls
We will only sell call options when we have available capacity
The underlying FT and the option amendment can be released to another shipper 
through capacity release 

Concerns that Need to Be Addressed in the Filing
Concentration of capacity/hoarding/affiliate issues.  Mike Coleman said that 
we need to address this issue head on in light of El Paso/CPUC cases.  They 
are worried that huge block of future capacity rights could be tied up by a 
single offering.  On the other hand, he said that perhaps we can use this 
filing as an opportunity to explain how our bidding on shipper calls adds 
improved transparency and protections.  One possible way to address this is 
to promise that the time frame for posting/bidding on shipper calls will 
depend on the size of the block.  (e.g. a 20 M/D package might involve a day 
bidding process, a 100 M/D block may involve a week posting).
Demonstrate that puts/calls don't undercut the release market.  Explain that 
release is used for day to day decisions, while we believe options will serve 
to help shippers with longer term strategic decision.
Be specific about any waivers of the part 284 regulations.
Work on the definition of the 4 options types.  They stumbled over some of 
the wording, like the use of phrase "recall" in the transporter call.


Detailed Notes
We had a surprisingly positive reception from Rates West.  This could be due 
in part to Mike Coleman's reputed continued interest on the electric side and 
his self-proclaimed corporate bent.  He did say that he understands the 
underlying business drivers for this program  and suggested that a flushed 
out narrative with the filing to explain these would help our efforts. He 
said that the timing on this type of offering is good now, as the Chairman is 
pressuring Staff to improve the marketplace (the California situation again).

Both groups suggested that we needed to lay out as much detail as possible in 
the filing, including examples of each type of options.  

As Mike delineated and we expected, the major issues that may cause 
discomfort are affiliate abuse and capacity hoarding (cornering the market 
under a long-term option) or speculative capacity holding.  To defend the 
service, we should lay out the impacts and explain why this offers an 
improvement over our present situation (discounted firm).  

Some Specific Questions from the Rates group included:
 How does this impact capacity release
 How does TW protect against hoarding
 Why aren't all options considered negotiated rates. 
 Are options tradable alone (without capacity)
 Would the availability of options change the volume of capacity held by ENA
 How are ROFRs affected
 
Some Specific Questions from the Policy group included:
 What are discriminating parameters/business decisions in allocating capacity
 How are competing offers allocated when in excess of available capacity
 How are options posted, bid on?  
 What are parameters of the options, specify range & degree of flexibility 
(explain whether strike dates are fixed) 
 What is the "trigger" or notice period for either a Call or Put; is it in 
the contract
 Is this a physical or financial product
 Does this verge into negotiated T&C territory?
 Is this like Koch's option proposal?  (No - Koch offers an option on price 
only)
kevin.hyatt@enron.com, tk.lohman@enron.com, christine.stokes@enron.com, 