EXHIBIT 10.22
CONFIDENTIAL & PROPRIETARY [DTE ENERGY LETTERHEAD]
DTE Energy Trading, Inc.
414 S. Main, Suite 200
Ann Arbor, MI 48104
Tel: 734.887.2000 Fax: 734.887.2104
Date: March 24, 2003
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 March 24, 2003 regarding the Transaction set forth below.
AGREED TO ECONOMIC TERMS
BUYER: CE
SELLER: DTEET
PRODUCT: Full requirements service product ("FRSP") (as
defined below) for CE's retail customers in Detroit
Edison's service territory (the "CE Customers"):
Energy delivery is measured and billed at the CE Customer
meter(s). Energy is to be used only to serve CE Customer
load under Detroit Edison's Electric Choice Program.
FRSP means firm Energy as measured and delivered to the CE
Customer retail meters which shall include load following
Energy, load forecasting and scheduling services,
applicable Detroit Edison/International Transmission
Company ("ITC") and Midwest Independent System Operator
("MISO") transmission and ancillary services charges,
including imbalance charges.
CONFIDENTIAL & PROPRIETARY [DTE ENERGY LETTERHEAD]
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]
WHOLESALE CONTRACT As defined in Sections 2.2, 2.3, and 3.1 of the
QUANTITY: Operating Agreement and with respect to this
Transaction:
[Confidential Treatment Requested]
TRANSMISSION & Seller will function as CE's Marketer in accordance
SCHEDULING with the Marketer Agreement for Electric Choice
REQUIREMENTS: Program between The Detroit Edison Company and
Seller. Seller will schedule point-to-point or
network integrated 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 Seller will schedule and deliver Energy according to
REQUIREMENTS: the Wholesale Contract Quantity. Further, Seller
will develop its 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.
If in any hour of any day during the Delivery Period, the
actual CE Customer demand exceeds [Confidential Treatment
Requested], Buyer will compensate Seller for the excess MW
of demand as specified below:
[Confidential Treatment Requested]
Buyer is responsible for all expenses, including taxes,
after the
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CONFIDENTIAL & PROPRIETARY [DTE ENERGY LETTERHEAD]
Delivery Point. Seller is responsible for all expenses,
including taxes, before the Delivery Point.
REGULATORY OR RULE If any of the following occurrences have material
CHANGES: 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 In connection with Energy provided by DTEET under
PERFORMANCE: 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").
Further, this Transaction Letter is subject to satisfaction
of the following condition precedent on or before April 11,
2003:
- DTEET's receipt of security [Confidential Treatment
Requested] irrevocable letter of credit or cash) from
Buyer.
SPECIAL PAYMENT CE will pay DTEET for the Energy pursuant to the
TERMS: terms of that certain Escrow Agreement dated July
24, 2002, which is incorporated by reference (the
"Escrow Agreement").
CE'S REPRESENTATION CE represents and warrants that there are no
AND WARRANTIES: 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
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CONFIDENTIAL & PROPRIETARY [DTE ENERGY LETTERHEAD]
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
Product 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 hereof. 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 copy to
Joseph Gallagher, Risk Monitor, by facsimile at 734.887.2056.
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CONFIDENTIAL & PROPRIETARY [DTE ENERGY LETTERHEAD]
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
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Randall D. Balhorn, President
April 10, 2003
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Date
ACCEPTED AND AGREED:
Commonwealth Energy Corporation
/S/ DICK PAULSEN
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Dick Paulsen, COO
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Printed Name and Title
April 9, 2003
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Date
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