1 Standard Wholesale Power Contracts Progress 2000 Christopher J. Bernard General Counsel Entergy Power Marketing Corp Co-Chair NEM Committee Working Group EEI

2 WHAT WE HAD u UTILITY INTERCHANGE AGREEMENTS u TARIFFS u “POWER GAS” TRADING AGREEMENTS u CONFIRMATION SHEETS u BABY ISDAs u NO CREDIT - NO PROBLEM

WAKE UP CALL !!!! u POWER COMPANY OF AMERICA u FEDERAL ENERGY u CITY OF SPRINGFIELD u $10,000 MEGAWATT HOURS –40X EXPOSURE IN 2 DAYS

4 WHAT WAS MISSING ? u COUNTERPARTY CREDITWORTHINESS u BILLING, PAYMENT, NETTING u DEFAULT TRIGGERS AND REMEDIES u BANKRUPTCY –SETOFF, FORWARD CONTRACT LANGUAGE, NETTING

5 CONTRACT PROTECTIONS 1999 REACTION u “BANDAIDS” u COMPREHENSIVE ”NETTING AGREEMENTS” u INCLUDED TERMS BORROWED FROM NATURAL GAS INDUSTRY & ISDA u AGGRESSIVE PUSH TO EXECUTE THESE “AMENDMENTS” u STANDARDIZED CONTRACTS MOVEMENT

6 “STANDARD” FORMS u WSPP –PHYSICAL NOT FINANCIAL –DOMESTIC & GEOGRAPHICAL u ERCOT –PHYSICAL –GEOGRAPHICALLY LIMITED u EEI/NEM –PHYSICAL & FINANCIAL –DOMESTIC u ISDA –FINANCIAL NOT PHYSICAL –DOMESTIC & INTERNATIONAL

7 STANDARDIZED CONTRACT EFFORTS –EEI/NEM v NATIONAL ENERGY MARKETERS ASSOC. v EDISON ELECTRIC INSTITUTE –WSPP v MORE MARKET DRIVEN PROVISIONS –ERCOT v ELECTRIC RELIABILITY COUNCIL OF TEXAS

8 WHAT ARE WE TRYING TO ADDRESS ? u CREDIT ASSURANCES u COLLATERAL u DEFAULTS & REMEDIES u BANKRUPTCY u MUNICIPAL AUTHORITY

9 –MAJOR PARTICIPANTS v 50 COMPANIES THROUGH NEM v COMPANIES THROUGH EEI v ENRON, NYMEX & OTHERS –STRENGTHENED RELATIONSHIPS THROUGHOUT THE INDUSTRY –CROSS POLLINATION OF INDUSTRY TALENT –DEFINITIONS & STANDARDIZED LANGUAGE STANDARDIZED CONTRACT EFFORTS

10 CONTRACT REFERENCE u GENERAL AND CONTRACT INFORMATION –NATIONAL ENERGY MARKETERS v –EDISON ELECTRIC INSTITUTE v –WESTERN SYSTEM POWER POOL v –ELECTRIC RELIABILITY COUNCIL OF TEXAS v

11 CURRENT ISSUES TO WATCH u REVISIONS IN GAS CONTRACTS u CROSS COMMODITY AGREEMENTS u E-TRADING AGREEMENTS u INCREASED DEMAND FOR CREDIT ASSURANCE DOCUMENTATION v NETTING AGREEMENTS v CROSS COMMODITY NETTING v PARENTAL GUARANTEES v CREATIVE CREDIT ASSURANCE ARRANGEMENTS

12 Standard Wholesale Power Contracts Progress 2000 Christopher J. Bernard General Counsel Entergy Power Marketing Corp Co-Chair NEM Committee Working Group EEI