---------------------- Forwarded by Steven J Kean/HOU/EES on 12/13/99 05:15 
PM ---------------------------


Janine Migden
12/13/99 03:57 PM
To: Steven J Kean/HOU/EES@EES, Richard Shapiro/HOU/EES@EES, James D 
Steffes/HOU/EES@EES, Harry Kingerski/HOU/EES@EES, Scott Stoness/HOU/EES@EES, 
Elizabeth Linnell/HOU/EES@EES, Ginger Dernehl/HOU/EES@EES, Lynnette 
Barnes/HOU/EES@EES, Susan.R.Lewis@enron.com
cc: Thomas S Reichelderfer/DUB/EES@EES, Barbara A Hueter/DUB/EES@EES, Lara 
Leibman/HOU/EES@EES 
Subject: West Virginia Settlement

Thom and I have just completed negotiations in West Virginia involving APS, 
AEP and other stakeholders.
The settlement, being filed today is a compromise on all the issues and is 
the result of negotiations.  Enron was the only marketer involved in the 
process.  While we weighed in all the issues, there are a number of items 
that but for our persistence would not have been included in the final 
agreement.  These items include the following:

1.  Native load language
2.  Competitive metering and billing for industrial and large commercials as 
of day one, with other customers following no later than within the next four 
years.
3.  Addition of competitive bidding for default service at end of 5 years.
4.  Change from functional separation to a requirement to corporately 
separate as soon as possible but no later than within the next five years.
5.  Strong codes of conduct that form the base for more detailed rulemaking.  
(A special thanks to Lara Leibman for her assistance).

Below is a summary of the entire settlement:

1.  All customers can exercise choice beginning January 1, 2001.
2.  All utilities including IOU's, munies and coops can opt in.  APS has 
committed to opt in whereas AEP is not because it did not get any stranded 
cost and it also did not get a guarantee of full recovery of all costs 
resulting from the environmental lawsuits against them irrespective of their 
financial condition.  
3.  Competitive metering and billing as described above.
4.  Generation is deregulated.
5.  PSC continues jurisdiction over implemention, rate unbundling, 
reliability, codes of conduct, supplier licensing, construction of 
transmission lines and eminent domain authority.
6.  Native load language - Requires utilities to provide service to 
affiliated and unaffiliated suppliers only under the applicable distribution 
tariffs and proformatransmission tariffs.
7.  RTO's - Each utility must join a FERC approved RTO or its equivlent by no 
later than 1/1/03;  best efforts requirement to eliminate pancaking by 1/1/05 
if IOU's are in separate RTO's.
8.  Competitive bidding process for  default service customers at end of year 
5 for remainder of transition period.
9.  Rate unbundling requirement
10. Rates capped for first 4 years with any FERC change in transmission being 
applied as an offset to distribution.
Rates continue to be regulated through the 10th year with the rate gradually 
increasing during the second six years for the residential and small 
commercial customers.  For the large commercial and industrial customers, the 
rate regulation ends 12/31/07.
11.  A rate stabilization deferral fund is created to facilitate the 
transition to competition in years 11, 12 and 13, under which APS must 
contribute $56.75 million and AEP must contribute $81 million to be used as 
an offset to the prices paid by small residential and commercial default 
customers.
12.  Large commercial and industrial customers receive for the first 4 years, 
rate decreases in an amount to be determined by the Commission for AEP 
customers and 3% for APS customers.  The rate decrease is allocated to 
distribution.
13.  No stranded costs (either generating or regulatory assets) for AEP or 
APS, however APS gets a ten year PURPA surcharge starting at 2.6 mills per 
kwh in year one and declining to .75 mills per kwh in the last two years.
14.  Usual licensing requirements.  (AEP fought for the right to have a 
second tier of licensing where they would have the ability to certify 
marketers but we defeated that).
15. Corporate separation and codes of conduct as described above.  
16. Consumer protection and education requirements typically found in other 
plans.
17. Low income protection provisions providing a .2 mil surcharge with the 
minimum being $.40 and the maximum being $300.
18. Utility worker protection plan.

Below for your information is the plan.




At this point the plan goes to the PSC for approval and then on to the 
legislature for a resoulution approving the PSC order.  We expect that AEP 
and labor will oppose it, so it will be a close call.

Janine