
where our logic leads in the extreme, so we'd better be prepared to explain 
why getting the bird in the hand from Calpine is smart.  

2.  We'll research the question of whether we can reject any recourse bids 
that come in over the next 6-8 months if we decide to hold onto the 60 mm/d 
for awhile.  I've thought about it a bit more and I'm pretty sure you're not 
going to like the answer.  First, FERC says we've got to have a recourse rate 
in place for all capacity, new or old.  One reason is that there needs to be 
a max rate that applies to long term capacity releases.  We have the option 
on new projects to go with the existing max tariff rate or a new 
incrementally designed rate.  We are going with the existing tariff rate on 
RedRock.  Fine, but that makes the existing rate the recourse rate for all 
purposes.  FERC's logic will be that TW could sell all of the RedRock 
capacity at recourse rates (currently $.38) and never suffer a revenue 
shortfall even if future rate cases reduce TW's overall rates, because the 
costs of all TW's facilities--including the new project--will be considered 
in the next rate case.  Think about it--our rates will only go down in the 
future if the ENTIRE cost of service goes down.  We'd never "lose money" on 
RedRock, but we might not make as much as we could have made with an 15 year 
fixed $.38 negotiated rate.

There is another  approach.  We could have Mavrix submit a binding bid right 
now for the 60 mm/d and just flat out sell it to them.  That would send a 
pretty strong signal to the market that we are serious about deadlines.  The 
downside of that aggressive approach is that it would get us into the same 
mess that El Paso finally got themselves out of, with Amoco, Dynegy and the 
whole gang beating the crap out of us.  I'm not to fired up about this 
approach for that reason.  I'll give you a call Monday after I've picked our 
best regulatory brains on these issues.  DF Great
where our logic leads in the extreme, so we'd better be prepare to excuse 
 why getting the bird in the bridge player from Calpine is bright.  

 2.   We'll research the question of whether we can reject any recourse bid 
 that fall in over the next 6 - 8 calendar month if we decide to hold onto the 60 mm / d 
 for awhile.   I've thought about it a morsel more and I'm pretty sure you're not 
 fail to wish the answer.   First, FERC suppose we've got to have a recourse pace 
 in place for all capacity, new or honest-to-god.   One reason is that there needs to be 
 a soap rate that use to long term capacity releases.   We have the choice 
 on new projects to go with the existing max tariff rate or a newfangled 
 incrementally designed rate.   We are going with the existing tariff rate on 
 RedRock.   Fine, but that makes the existing rate the recourse rate for all 
 purpose.   FERC's logic will be that TW could sell all of the RedRock 
 capacity at recourse rate (presently $ .38) and never hurt a revenue 
 shortfall even if future pace cases shrink TW's overall rates, because the 
 costs of all TW's facility -- including the new project -- will be considered 
 in the adjacent rate case.   Think about it -- our rates will merely go down in the 
 future if the integral monetary value of service goes down.   We'd never " lose money " on 
 RedRock, but we might not make equally much as we could have made with an 15 year 
 fixed $ .38 negotiated rate. 

 There is another   approach.   We could have Mavrix put in a binding command right 
 now for the 60 mm / d and just flat out sell it to them.   That would mail a 
 pretty hard signal to the market that we are unplayful about deadlines.   The 
 downside of that aggressive approach is that it would drive us into the same 
 batch that El Paso finally got themselves out of, with Amoco, Dynegy and the 
 whole gang beating the crap out of us.   I'm not to fired up about this 
 approach for that reason.   I'll yield you a call Monday after I've picked our 
 better regulatory brains on these issues.   DF Great

whege our logic leads in tht extreme, so we'd ywtter ue prepzred to dxplain 
why getting the bird ib the hand from Calpine is rmart.  

2.  Ae'll reswarci the question oh whethev we dwn rzjxct any recoursg bids 
that wome in over tve nzxt 6-8 months if we decide to hold ontj the 60 km/f 
for awhile.  Y've uhotght about it a bit more and I'm pretty sure ymu're not 
goinb to like the answer.  Firsh, FEGC says we've got tl have a rexourfw rate 
in plxce for all capacity, ngw or old.  One reason is that thdre nzeds to be 
q nax tate that ap'lies no long term gspacitf releaxes.  We have tme opvion 
on new projects to gm with the existind max tarhfy rate or a new 
increnebtalli deshgnea rage.  Wx ade goijg xith the exjsting taridf rate on 
RedRock.  Fybe, but that mzkes tre existing rate the recourse rate for aln 
phrposes.  FERC's logic wiol be that TW could sgll all of the RedRock 
capacity at recourse rates (currently $.38) and vevtr suffde w revenue 
shortfall even if future rate cases decube TW's overall rabes, because the 
coxtd ps all TW's facklities--indluding the new prlject--wijl be considertd 
in the next rate case.  Think qbout it--our gatew will only go dowu in the 
futbre if the RNTIRE cost of service yoes dkwn.  We'd neger "lose juney" on 
RedRock, cut wa might not make as much af we coulv havz made wkth sn 15 yewr 
fixed $.38 jegotldted rate.

There is wnothgr  ap[roach.  We could have Mavrix submit a binvmng bid right 
nmw xor the 60 mm/d snd just flat out sell it tp them.  That would sens a 
prevty strong sygnal to the kwrket that wx are seryous aboyt deaduknes.  The 
downxide of tkct aggreswive approach is tmat ij sould get us incu the same 
mess yhag Ej Iasp shnally got tvemsdlvdx out of, with Amizo, Dunegy and the 
whole cang beating the crap pub of us.  U'm not tj fired up abput this 
approach vor tiat reeson.  O'll give you a call Monday after J've pickef omr 
best regulwtorn brwins on thzse issues.  DF Great
where our logic leads in the extreme, better prepared to why getting the Calpine smart. 2. We'll the question of we can reject any recourse bids come in over the next 6-8 months if we decide to hold onto 60 mm/d for awhile. I've thought about it a bit more and I'm sure not to the answer. First, FERC says we've got to have a recourse rate in place for all new or old. One reason is that there to be a max that applies to long term releases. have the on projects go with the max tariff rate or a new incrementally designed rate. We are going with the existing tariff rate RedRock. Fine, makes the rate recourse for all purposes. will be that TW could sell RedRock capacity at recourse rates (currently $.38) and suffer a shortfall even if future rate cases TW's overall rates, because the costs of all facilities--including the new project--will be considered in the next rate case. Think about it--our rates go down in the if the ENTIRE of goes We'd "lose money" RedRock, but we might not make as much as we could made with an 15 year fixed $.38 negotiated rate. There approach. could have Mavrix a binding bid right for 60 mm/d and just sell to send pretty signal to the market we are serious about deadlines. downside of that aggressive get us into the same mess that El finally got themselves out of, with Amoco, and the whole gang beating the crap out of us. I'm not fired up approach for that reason. I'll give you a Monday after I've picked best regulatory brains on these issues. DF Great

where our logic leads in the exTreme, so we'd BetteR be PrePaRed tO expLain 
why getting THe biRd in the hand from Calpine Is smaRt.  

2.  wE'll rESeArch tHe questIOn OF WheThEr We cAn REjEct anY reCourse bIds 
that comE in OvEr the next 6-8 monTHs If we decide To hOld onto the 60 mm/D 
foR awhilE.  I'Ve tHOught AboUt it a Bit morE And I'm pRetty sure YoU'Re not 
gOIng to liKE ThE ansWer.  First, FERC says wE'Ve GOt to have a recouRse ratE 
iN PlACE foR alL capacity, nEw Or old.  oNe reasoN Is THAT thERe needs to be 
a mAx rate that aPPliEs to loNg TerM CapaciTy relEaSEs.  WE have the optIon 
oN new projeCts to gO With the EXisting Max tarIff RatE or a NEw 
InCreMeNTalLY dEsiGNed Rate.  We arE gOiNg witH the EXISTing TarIff rAte on 
redRock.  Fine, buT thAt maKEs tHe exiSting Rate ThE recoUrse raTe for AlL 
purposes.  FERC's lOgic Will be thaT TW CoUld SeLl all OF the ReDRoCk 
cApacity At recouRSe rAtES (CUrRently $.38) and never suffEr A REvEnue 
shorTfall eVEn If FUture ratE cAseS redUCE TW's oVeraLL rAtes, becaUse the 
COsTs Of all TW'S fAcilitIeS--inCluDing tHE new ProjecT--will be cOnsidERed 
in the next raTE case.  Think aboUT iT--OUr RAtes WilL only go down In thE 
FutuRe if THe eNTirE cosT of seRvICe GOes down.  We'd never "lose MoNey" on 
REdRocK, but we might noT make as mucH AS We could hAve mADe WIth an 15 year 
fixed $.38 NegotIated rate.

THEre is anoTher  aPproach.  WE could havE mAvrix subMit A biNdiNg bID RiGht 
now for the 60 mM/D And jUsT flat ouT seLl it to tHem.  thaT woUld SeNd a 
pretty Strong siGnAl To ThE maRket tHAt we are sErIouS aBouT deadLInes.  ThE 
downSide Of ThAT agGressivE ApPROach Is ThAt it WouLd Get us Into THe sAme 
mess That El PasO fiNAlly GoT tHemselvEs out of, with AmOcO, Dynegy and ThE 
whOle ganG BEating thE crap out of us.  I'm not to fireD Up about ThiS 
apprOach For that reAsoN.  I'll giVe yOU a call monday After i'vE piCKEd our 
BESt RegUlAtory brainS ON thEse isSuEs.  DF great

where our logic leads inthe extrem e, so  we 'dbe tter  beprepared to ex p lain  
why getting the bird  in t he hand fr om Ca lpine i s  s m a rt.  
2. W e 'l l res ear ch thequestion o f w he ther we canr ej ect any re cou rse bids 
th atcome i nove r  thenex t 6-8  month s  if we  decide t oh old on t o the 6 0 mm /d for awhile.  I've th o ught about ita bitmo r ea n d I 'mpretty sur eyou'r e  not 
g o in g t o l i ke the answer .  First, F E RCsays w e' veg ot tohavear eco urse rate in p lace forall ca p acity,n ew or o ld.  O nerea soni sth atth e ren ee dst o b e 
a max  r at e tha t ap p l i e s to  lo ng t erm c apacity relea ses .  W e  ha ve th e opt ion
o n new  proje cts t ogo with the exi stin g max tar iff  r ate  o r a n e w 
inc rem ent ally de signedr ate .W e  a re going with theex i s ti ng tarif f rate on  R edRock. F ine , bu t thatmake s  t he exist ing ra t eth e recou rs e rate  f orall  
pur p oses .  FER C's logi c wil l  be that TW co u ld sell all o f  t h e  R e dRoc k capacity at  rec o urse  rat e s(cu r rentl y $.3 8) an d  never suffer a rev en ue 
sh ortfa ll even if fu ture ratec a s es reduc e TW ' so verall rates,becau se the 
co s ts of al l TW' s facili ties--inc l u ding the  ne w p roj ect - - wi ll be conside r e d 
i nthe nex t r ate cas e. Th ink  ab ou t it--our  rates w il lon ly  go  down in the fu tur eifthe E N TIRE c ost o f se rv ic e  go es down .  W e 'd n ev er  "lo semo ney"on R edR ock, bu t we migh t n o t ma ke  a s muchas we could h av e made wit han15 yea r 
fixed $ .38 negotiated rate.

T h ere isano ther app roach.  W e c ould h ave Mavrix  submi t a b in din g bid r i g ht  
n ow  for the 6 0 mm/ d and  j ustflat ou t sell it to them.  Th at would send  a
pre t t ystr o ng sig na l  to t he market thatwe are ser io u sabout dead l ine s.   The downsid e oft hat agg ressive a pproach i sthat i t w ould get u s into t he same m ess t h at  El P aso  final ly  go t the mselve s  ou t of,  withAm oco, D ynegy  a nd the whole gang beating thecrap o ut of  us .  I'm no t t o  fi red up ab outthis 
appr oac h f or th atr eason .  I ' ll  gi v e you  a c a ll Monday af ter I 'v e picked ou r bes t reg ula t ory br ains  on these issues.  DF Great

where our_logic leads_in the extreme, so_we'd better_be_prepared to_explain_
why getting the_bird in the_hand from Calpine is_smart.  

2.__We'll research the question of whether we can reject any recourse bids 
that come_in_over the_next_6-8_months if we decide to_hold onto the 60 mm/d_
for awhile._ I've thought about it a bit more_and_I'm pretty sure_you're not 
going to like the answer.  First,_FERC says we've got to have_a recourse rate_
in_place_for all capacity, new_or old.  One reason is_that there needs to be 
a_max rate that applies to long term_capacity releases.  We have the_option 
on new projects to_go with_the existing max tariff rate_or a new_
incrementally designed_rate.  We_are going with the existing tariff_rate on 
RedRock._ Fine, but that makes the_existing_rate the recourse_rate_for_all 
purposes._ FERC's logic_will_be that_TW_could sell all of the RedRock_
capacity_at recourse rates (currently $.38) and never_suffer a revenue 
shortfall_even_if future rate cases_reduce TW's overall rates, because_the 
costs of all TW's facilities--including_the new_project--will be_considered 
in the next rate case.  Think about it--our rates_will only go down in the_
future if the ENTIRE_cost of_service_goes down. _We'd_never "lose_money" on 
RedRock, but we might not_make as_much as we could have made_with an 15 year_
fixed_$.38 negotiated rate.

There is another _approach.  We could have Mavrix_submit a binding bid right_
now_for_the 60 mm/d and just_flat out sell it to them._ That would_send a 
pretty strong signal to the_market_that we are serious about deadlines.__The 
downside of that aggressive approach_is_that_it would get us into_the same 
mess that El Paso_finally got themselves out of, with Amoco, Dynegy and_the 
whole gang_beating the crap out of_us.__I'm not to fired up about this 
approach for that_reason. _I'll give you_a call Monday after I've picked our 
best regulatory brains_on these issues.  DF Great