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FERC Asked to Quickly OK Move to Bring New England Plants Online

June 5, 2006
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FERC is being asked to quickly sign off on a proposal that could allow for the return to service of two 265 MW power plants in New England prior to the dog days of this summer. The plants, which are located in Rhode Island and Maine, have been operated by indirect subsidiaries of bankrupt Calpine Corp.

At issue is a May 22 filing submitted to FERC on behalf of James Goodman, a former bankruptcy judge, and U.S. Bank National Association [EC06-122].

PMCC Calpine New England Investment LLC leases the plants to Rumford Power Associates Limited Partnership and Tiverton Power Associates Limited Partnership. Rumford and Tiverton have served as operators of the power plants, but in December, Tiverton and Rumford filed for bankruptcy protection, along with certain of their affiliates, including their indirect parent, Calpine.

Under the filing, Goodman would serve as a receiver for the power plants. As of the date of the FERC filing, Goodman had not yet received his appointment as receiver. However, an application was filed on May 22 with the former federal district court judge seeking that appointment. Goodman served as a U.S. bankruptcy judge for the District of Maine from 1981 to 2001 and was chief judge from 1990 to 1997.

Goodman "was a resident of Maine and has a personal interest in ensuring the electric reliability of the New England region is not adversely impacted by the transaction and that the facilities are properly transitioned and operated," the filing noted.

In connection with its acquisition of the plants, PMCC Calpine New England entered into an indenture of trust, mortgage and security agreement with U.S. Bank National Association. The bankruptcy filings by Tiverton, Rumford and Calpine constitute an event of default under the indenture, facility leases and other related transaction documents, FERC was told.

As proposed by the application, Goodman will engage an asset manager to supervise the operation of the plants and to provide other asset management services. "The asset manager will be responsible for the orderly and complete transition of the facilities to the receiver, and once the facilities are fully operational, the asset manager will be responsible for the management, senior level oversight, operations, energy management, accounting, environmental, regulatory, IT and administrative support for the facilities," the application notes. This includes fulfilling and complying with all FERC regulatory requirements.

Goodman may also engage General Electric (GE) to perform transitional services and site operations and maintenance. U.S. Bank National Association "has been involved in preliminary discussions with GE regarding this assignment," the filing said. This would include daily operations and maintenance, management of third-party service providers and subcontractors, major maintenance planning and execution, reporting, annual budgeting, execution and processing of facility purchase orders, and administration of all human resources and associated payroll and benefits.

In addition, Goodman may engage Merrill Lynch Commodities Inc. to provide energy marketing services for the facilities. Merrill would be responsible for the marketing, trading, scheduling, risk management and associated administrative services related to facilities.

"Merrill would perform these services by providing fuel to, and acquiring the output from, the facilities under a market-based pricing arrangement and will sell output in the electricity markets consistent with its membership with ISO-NE [ISO New England]," the filing disclosed. U.S. Bank National Association and Merrill have been involved in negotiations regarding the retention of Merrill by Goodman.

The two power plants are shut down and no longer producing electricity. Rumford and Tiverton each idled its generating plant in November 2005 and February 2006, respectively.

"We have been informed that Calpine has claimed that these plants are in a 'forced outage' status under ISO-NE rules without a date for their return to service. Consequently, it appears that the capacity and energy of those plants are not currently available to meet the needs of New England electricity consumers. Expedited approval of the transaction is requested so that the receiver may take the necessary steps to attempt to resume electricity generation at the Rumford and Tiverton power plants prior to the summer peak load period," the filing said.

At the time of the May 22 filing, a bankruptcy court was scheduled to consider approval of Goodman's agreement to acquire control over the two plants and their related transmission facilities "within the next several days."

U.S. Bank National Association has been informed by Kelson New England LLC, which has been acting as its advisor in discussions with Calpine concerning the plants, that bringing the plants back online from their current shutdown status will require a minimum of two to three weeks.

U.S. Bank National Association through Kelson and other advisors is already working to obtain the fuel supply agreements and other agreements needed in order to generate electricity, the filing said.

U.S. Bank National Association was also informed that some physical work is necessary to bring the plants back into operation. However, this preparatory work to bring the plants back to service cannot be completed until the receiver has been appointed and, subsequent to the approval of the Commission, can exercise control over the plants.

Therefore, FERC's approval of the transaction by June 12 will allow Goodman to attempt to complete the service restoration process with the objective of restoring the plants to service as soon thereafter as possible,

Subject to federal bankruptcy court approval of the agreement by which Goodman will seek to take over the facilities, which is expected by June 6, and subject to issuance of a Commission Section 203 approval by June 12, U.S. Bank National Association "believes that the receiver, when appointed, will be ready, willing and able to employ best efforts to restore the plants to service as soon as possible within the month of June."

FERC was told that prompt approval of the transaction "will further the public interest by promoting electric reliability in New England and increasing the amount of power available for purchase and consumption in the New England region."

The return of the plants to service prior to the 2006 summer peak season is "especially important" according to court papers filed by ISO-NE, the application went on to say.

The two 265 MW gas-fired combined cycle electric generating plants are located in Tiverton, RI, and Rumford, ME.

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