[DTE ENERGY LETTERHEAD]
EXHIBIT 10.23
Date: July 25, 2002
To: Commonwealth Energy Corp.
15901 Red Hill Ave., Suite 100
Tustin, CA 92780
Attn: Dick Paulsen
Phone: 714.259.2523
Fax: 714.259.2563
Re: CONFIRMATION OF TRANSACTION WITH COMMONWEALTH ENERGY FOR WHOLESALE
ELECTRICITY TO SUPPLY COMMONWEALTH ENERGY'S RETAIL CUSTOMER LOAD IN
DETROIT EDISON'S SERVICE TERRITORY
This Confirmation memorializes the oral Transaction agreement between Steve
Sheppard of DTE Energy Trading, Inc. ("DTEET") and Dick Paulsen of
Commonwealth Energy ("CE") dated July 25, 2002 regarding the Transaction set
forth below.
AGREED TO ECONOMIC TERMS
BUYER: CE
SELLER: DTEET
PRODUCT: [Confidential treatment requested]*
[Confidential treatment requested]*
[Confidential treatment requested]*
DELIVERY PERIOD: As defined in Sections 2.2 and 2.3 of the Operating
Agreement between Seller and Buyer, effective July 24,
2002 ("Operating Agreement") and with respect to this
Transaction:
- [Confidential treatment requested]*
- [Confidential treatment requested]*
from the date the last
CE Customer begins taking Energy
supplied by CE under the terms of this
Transaction
WHOLESALE CONTRACT
QUANTITY: As defined in Sections 2.2, 2.3, and 3.1 of the
Operating Agreement and with respect to this
Transaction:
- Maximum demand of [Confidential
treatment requested]*
- Estimated Energy [Confidential treatment
requested]*
- ------------
* The omitted information has been filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2.
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[DTE ENERGY LOGO]
- Actual Energy volume, as provided by
ITC/MISO and reduced by ITC/Detroit
Edison transmission and distribution
losses, will determine the actual
Wholesale Contract Quantity delivered.
TRANSMISSION & SCHEDULING
REQUIREMENTS: Seller will function as CE's Marketer in
accordance with the Marketer Agreement for
Electric Choice Program between The Detroit
Edison Company and Seller. Seller will schedule
point-to-point transmission service and schedule
ancillary services up to the CE Customer meter(s).
CONTRACT PRICE: As defined in Sections 2.2 and 3.2 of the
Operating Agreement and with respect to this
Transaction;
[Confidential treatment requested]*
DELIVERY POINT: CE Customer meter(s)
PRODUCT FIRMNESS: Physical, Firm Energy with Liquidated Damages.
SCHEDULING
REQUIREMENTS: Seller will schedule and deliver Energy according
to the Wholesale Contract Quantity. Further,
Seller will develop it's own day-ahead forecast
for energy scheduling.
SPECIAL CONDITIONS: Buyer will function as the AES/Retailer in
accordance with the AES/Retailer Agreement for
Electric Choice Program between The Detroit
Edison Company and Buyer.
Buyer will select Optional Retail Access Backup
Service when enrolling CE Customers in Detroit
Edison's Electric Choice Program.
Buyer is responsible for all expenses, including
taxes, after the Delivery Point. Seller is
responsible for all expenses, including taxes,
before the Delivery Point.
REGULATORY OR
RULE CHANGES: If any of the following occurrences have material
adverse economic consequences to Seller or Buyer,
then the parties agree to use their best efforts
to negotiate in good faith to restore the
original economic value of this Transaction: 1) a
change in existing rules, regulations, procedures
or protocols of the entity governing the
transmission of Energy, capacity, scheduling or
ancillary services, or 2) a change in the
obligations of load serving entities in the ITC
(or its successor entity) control area.
SECURITY FOR CE'S
PERFORMANCE: In connection with Energy provided by DTEET under
this Transaction, CE will grant DTEET a security
interest in, and lien on (and right of setoff
against), and assignment of, all account
receivables relating to the sale of Energy by CE
to certain CE Customers (the "Secured Party
Accounts Receivable") pursuant to that certain
Security Agreement dated July 24, 2002, which is
hereby incorporated by reference ("the Security
Agreement").
SPECIAL PAYMENT
TERMS: CE will pay DTEET for the Energy pursuant to the
terms of that certain Escrow Agreement dated July
24, 2002, which is incorporated by reference (the
"Escrow Agreement").
- ------------
* The omitted information has been filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2.
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[DTE ENERGY LOGO]
CE's REPRESENTATIONS
AND WARRANTIES: CE represents and warrants that there are no
encumbrances limiting or interfering with DTEET's
rights in the Secured Party Accounts Receivable;
CE represents and warrants that it will undertake no
action to negate or diminish DTEET's interest in the
Secured Party Accounts Receivable and will cooperate
fully with DTEET to protect DTEET's interest arising
under this Transaction;
CE represents and warrants that it has irrevocably
instructed each CE Customer receiving the Energy and
all other persons or entities paying CE for the Energy,
and shall so instruct all future CE Customers receiving
the Energy and all other persons or entities at any
time paying CE for the Energy, to make payment to the
Lockbox (as defined in the Escrow Agreement), and that
it will use all commercially reasonable efforts to
cause all such persons or entities to agree to make
payments to the Lockbox; provided, however, that CE
may, subject to the terms and conditions of the Escrow
Agreement, Security Agreement, and EEI Master Power
Purchase and Sale Agreement, instruct each CE Customer
receiving the Energy and all other persons or entities
paying CE for the Energy to make payment to a different
account upon the termination of this Transaction or the
Escrow Agreement); and
CE represents and warrants that it will promptly notify
DTEET if it is aware that any person or entity
instructed to make payment to the Lockbox has refused
or failed to make any such payment to the Lockbox, and
will as promptly as possible deposit such payments
received by CE into the Lockbox.
CE represents and warrants that it will only use the
Products purchased hereunder to serve its retail
customer load under the Detroit Edison Electric Choice
Program, and that it will not be resold in the
wholesale market.
This Transaction Letter shall be governed by the terms and conditions set forth
herein and the EEI Master Power Purchase and Sale Agreement between DTEET and
Buyer, effective May 11, 2001 (the "Master Agreement") which is incorporated by
reference and made a part here of. In the event of a conflict between this
Transaction Letter and the terms and conditions of the Master Agreement,
including, but not limited to, the product definitions in Schedule P of the
Master Agreement, this Transaction Letter shall govern.
Please execute this Transaction Letter by signing below and returning a coy to
Joseph Gallagher, Risk Monitor, by facsimile at 734.887.2056.
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CONFIDENTIAL & PROPRIETARY
[DTE ENERGY LOGO]
If this Transaction Letter is not executed and returned within two (2) Business
Days, it shall be deemed correct as sent. Questions should be referred to Joseph
Gallagher, of DTEET, at 734.887.2004.
Sincerely,
DTE Energy Trading, Inc.
Approved
/s/ RANDALL D. BALHORN
- -------------------------------------
Randall D. Balhorn, President
7/25/02
- -------------------------------------
Date
ACCEPTED AND AGREED:
Commonwealth Energy Corporation
/s/ DICK PAULSEN
- -------------------------------------
Dick Paulsen, Chief Operating Officer
7/26/02
- -------------------------------------
Date
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