EXHIBIT 10.23
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: July 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 July 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 As defined in Sections 2.2 and 2.3 of the Revised Operating
PERIOD: Agreement between Seller and Buyer, effective July 24, 2003
("Operating Agreement") and with respect to this Transaction:
[Confidential Treatment Requested]
WHOLESALE As defined in Sections 2.2, 2.3, and 3.1 of the Operating
CONTRACT Agreement and with respect to this Transaction:
QUANTITY:
[Confidential Treatment Requested]
TRANSMISSION Seller will function as CE's Marketer in accordance with the
& SCHEDULING Marketer Agreement for Electric Choice Program between The
REQUIREMENTS: 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 As defined in Sections 2.2 and 3.2 of the Operating Agreement and
PRICE: with respect to this Transaction:
[Confidential Treatment Requested]
DELIVERY CE Customer meter(s)
POINT:
PRODUCT Physical, Firm Energy with Liquidated Damages
FIRMNESS:
SCHEDULING Seller will schedule and deliver Energy according to the
REQUIREMENTS: Wholesale Contract Quantity. Further, Seller will develop its
own day-ahead forecast for energy scheduling.
SPECIAL Buyer will function as the AES/Retailer in accordance with the
CONDITIONS: 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 will transfer to Seller its rights to any congestion hedges
provided through MISO. Such congestion rights include, but are
not limited to, Financial Transmission Rights ("FTRs"). Seller
will request, procure, and utilize all FTRs to which the Buyer is
entitled and Seller elects to receive. Seller shall retain all
value, positive or negative, associated with such FTRs.
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CONFIDENTIAL & PROPRIETARY [DTE ENERGY LETTERHEAD]
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
Delivery Point. Seller is responsible for all expenses, including
taxes, before the Delivery Point.
REGULATORY OR If any of the following occurrences have material adverse
RULE CHANGES: 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 Detroit Edison service territory or the
Michigan Electric Coordinated Systems ("MECS") (or its successor
entity) control area.
SECURITY FOR In connection with Energy provided by DTEET under this
CE'S Transaction, CE will grant DTEET a security interest in, and lien
PERFORMANCE: 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 CE will pay DTEET for the Energy pursuant to the terms of that
PAYMENT TERMS: certain Escrow Agreement dated July 24, 2002, which is
incorporated by reference (the "Escrow Agreement").
CE'S CE represents and warrants that there are no encumbrances
REPRESENTATION limiting or interfering with DTEET's rights in the Secured Party
AND Accounts Receivable;
WARRANTIES:
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
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CONFIDENTIAL & PROPRIETARY [DTE ENERGY LETTERHEAD]
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 to further protect DTEET's first
priority security interest in the Secured Party Accounts
Receivable, it acknowledges that DTEET is the customer of
Standard Federal Bank with respect to the Lockbox/Escrow Account,
and furthermore, that CE agrees that it will not, at any time
during the Term of this Transaction, enter into any credit
transaction with Standard Federal Bank (because it is the Bank
maintaining the Lockbox/Escrow Account).
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 July 1, 2003 (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
7/24/03
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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
7/24/03
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Date
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