Gerald,

I intended to send you a copy of the attached.

Bill

-----Original Message-----
From: Bill Bryant
Sent: Monday, November 05, 2001 4:30 PM
To: Marchris G. Robinson (E-mail)
Subject: Gulf Rate Docket - Weather Derivatives




MR,

With information about Harry's testimony in Georgia and about the existing
Gulf revenue sharing program, I've changed my opinion about whether Enron
should intervene in the Gulf docket.  Enron may benefit from intervening in
the Gulf rate docket both by selling the Florida Commission on its weather
derivatives and by dissuading the Commission from raising the retail rates
charged to ECS/EES.

The Commission's order in the territorial dispute is due December 3.  To
avoid any adverse inferences in that docket as a result of intervening in
the Gulf rate docket, we should not file the intervention until after that
time.

There is a preliminary issue identification meeting in the Gulf rate docket
on Nov. 7, but this may be moved because a meeting in the RTO docket has
just been scheduled for the same time. We will attend both meetings.

Enron likely has standing to intervene in this docket.  Both the Florida
Cable Telecommunications Association and the Florida Industrial Power Users
Group (which has no significant member in Gulf's territory) have been
granted standing to intervene on the simple grounds that they are retail
customers of Gulf and electricity represents one of their largest variable
costs.  Gulf has not objected to the petitions of any persons seeking
standing.  The Federal Executive Agencies also have standing to represent
four military bases in Gulf's territory.

The existing and soon expiring revenue sharing mechanism makes this docket
ripe for pitching weather derivatives.  If we petition (after Dec. 3) and
are granted standing to intervene, it will be necessary to prepare and file
Harry's direct testimony and exhibits by December 21. The schedule of
remaining activities in the Docket is:

  issue statements due:  Jan. 2
  second issue identification meeting:  Jan. 14
  Prehearing statements:  Jan. 24
  Prehearing conference:  Feb. 8
  Hearing:  Feb. 25 - Mar. 1
  Briefs:  March 15

Natalie spoke to the Rates and Tariffs Division at the PSC about the usage
characteristics of the military bases.  As we discussed, I was curious about
whether they were also designated PX (Large High Load Factor Power Service).
Because a customer's designation is Gulf's proprietary (and very guarded)
information, one cannot know for sure whether the military bases have the
same designation as ECS.  However, Dave Wheeler, asst. director of rates,
said the military bases are probably designated LP (large power service) and
not PX.  PX designation applies for customers whose demand is 7.5 MW (7,500
kw), with an annual load factor of at least 75%, at any one meter.  The
military bases take delivery at multiple delivery points and probably have
different rates at the different delivery points.  They likely do not take
more than 7.5 MW at any one point.

The LP or LPT (large power time sensitive) designation is more likely
because that applies to customers with a demand of 500 kw, which the
military bases probably have at various delivery points. Still, it is very
likely that the rate increase, as proposed, does not affect the federal
executive agencies.

Dave Wheeler also guaranteed that Gulf's current rate proposal (that leaves
the PX rate unchanged) will not be approved by the Commission.  He said that
they will not permit a rate increase that affects only small customers. Bad
politics.

The level of effort required for this intervention will be greater than the
RTO Docket. There we had only to endorse positions asserted by others.
Although here we will merely be endorsing Gulf's rate methodology, we will
also be introducing the weather derivatives concept as relevant to Gulf's
rates. Gulf may be so excited by the potential of weather derivatives that
they carry the burden by themselves. However, we can't count on that until
we are sure that they understand and can sell the product to the Commission
and staff. Therefore, the Enron budget for this intervention will have to
assume that Enron carries the burden. We will be expected to advocate and
participate fully.

Based on these assumptions I think it likely that the KKH fee expense for
full participation in this Docket will be about twice that in the RTO
matter. In the RTO Docket we billed Enron $27,204 through October (after
writing-off $4,207 at your request). Therefore, a planning number for this
Docket (no guarantee that it will be limited to this amount) is $50,000.

Let me know what you decide.

Bill
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