QUESTION: Joe, Jeff an Bob: Here is a summary of those counterparties that have had specific objections to our new form of Annex A: 1. Sithe Energy - wants New York law to apply 2. Voest-Alpine Intertrading USA, Inc. - won't agree to the setoff language. Credit should be consulted prior to any further trades to see if they are okay with this given our relationships with this entity. 3. Madison Gas & Electric - will not agree to the "or otherwise" language in the setoff language. Again, this is a credit issue. 4. Cargill - wouldn't review the new language because we are close to getting a master in place with them. Sara expects this to happen in the next few days. 5. Idacorp Energy Solutions, L.P. - same as Cargill. I am working on this one and their attorney owes me a response. This one may take a few weeks. 6. Formosa Plastics - this is the counterparty that sent the threatening letter. It didn't appear from our records that we have traded financial derivatives with them recently. 7. General Electric Company - won't accept the chnages and have failed to tell me specifically what they object to. I will continue to follow up with their attorney. 8. Basin Exploration, Inc. - same as General Electric. 9. TransMontaigne Product services Inc. - sent letter out on March 30 saying they would respond in 30 days and I have never heard back from them. I will follow up with their attorney. 10. Reliant - they didn't accept the new language that we added as clause (z) to Section 3(e) and wanted to deal with this differently in the confirmation as a trigger that would give us the right to call for collateral. Credit should be alerted. 11. Devon Energy - they had in the past requested more time to review Annex A and when I followed up with them last week, they still didn't have a response. 12. Smurfit - Stone Container - same as Devon energy. 13. Public Service Gas & Electric Company - we are close to finalizing an ISDA with them. If we do any trades with them before one is signed they have requested chnages in few areas to match what we have agreed to in the iSDA negotiations. I can prepare a mark-up.
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ANS: Additions to Special Handling List

QUESTION: Larry: HE 13 EDT - Original deal made for 50 MW @ $82.20 - Hourly P&L notes deal was cut at 12:15 and therefore only 13 MW flowed as confirmed by PJM data - Tag review indicates flow started at 12:15 and ended at HE 13 (38 MW flow) - Settlements is requesting this be revised back to 50MW @ $60/MW - I need input from you regarding this deal to determine the action required. Please provide any helpful info you have as soon as possible. HE 10 EDT - Just an FYI that the purchase price was changed to $41/MW from $42 at the request of Exelon to our Settlements group. I went ahead and changed it due to the low value and because it is in our favor. If you disagree with this or have any questions, please let me know. Thanks,
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ANS: 705512.1 - 07/24/01

QUESTION: The Southeast RTO orders are out and have followed through with what we exp= ected from the discussion at the FERC meeting. The SPP and Entergy RTO proposals have been rejected because they fail to s= atisfy the scope and configuration requirements of Order No. 2000. The Com= mission notes that the required discussions between SPP and Entergy and it= s neighboring RTO/TOs has led to no increase in the original scope and conf= iguration. The filings by SPP and Entergy were brief, indicating only a la= ck of interest by other RTOs or utilities in joining to enlarge scope; they= failed to specify any details of the talks, what changes could be made or = what could be fixed to accomodate combination with other RTOs. The order s= tates that the Commission favors the development of large, regional transmi= ssion organizations reflecting natural markets. The Commission indicates t= hat they favor four RTOs - NE, SE, MW and West. Therefore the order requir= es the participants in SPP and Entergy to participate in settlement discuss= ions as set out in the mediation order. Note that these meetings will star= t next Tuesday, July 17 before a FERC ALJ. The Southern Company RTO is also found by the FERC to fail the scope charac= teristics of Order No. 2000. The order finds that Southern's approach to f= ocus on MOUs and seams issues with its neighbors is inadequate. The order = states, "We reiterate: the Commission's goal is to have a single RTO in the= Southeast, and to have that single RTO operational as soon as possible." = The Commission recognizes that start-up costs in forming a larger RTO may b= e more, but that over the longer term, large RTOs will foster market develo= pment, will provide increased reliability and will result in lower wholesal= e electricity prices. The order therefore directs the parties to the media= tion as stated above. The Grid South participants are also directed to the mediation which is sta= rting on next Tuesday. It is a lengthier order with more details on other = aspects of RTOs, including Independent Board requirement, congestion managm= ent, interconnection procedures, planning process and CBM. Therefore, I am= attaching a summary of the order. One of the important findings of the or= der is that GridSouth is not sufficiently independent; the Applicant TOs ar= e making policy decisions that should be made by an independent board. The= refore, the order requires GridSouth to install an independent board and fi= le a compliance filing within 90 days. If anyone wants copies of the orders, let me know.
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ANS:
RTO Orders - Grid South, SE Trans, SPP and Entergy