Question-and-Answer Session
Operator
(Operator Instructions) Our first question will come from the line of Paul Patterson – Glenrock Associates.
Paul Patterson – Glenrock Associates
So, if I understand this decrease at Connectiv, it's within your range but it's a lower end of the range, is that sort of what the thought process is?
Paul Barry
That's correct.
Paul Patterson – Glenrock Associates
Okay, but there's no need to change the range?
Paul Barry
No, we're not changing the range, Paul.
Paul Patterson – Glenrock Associates
Okay, and what is it that offsets, I mean, what should we think about offsetting the $72 million decrease in the next three quarters?
Paul Barry
I'm not sure I understand the $72 million.
Paul Patterson – Glenrock Associates
Well, there's a $72 million reduction this quarter versus last year and –
Paul Barry
Gary Morsches probably can respond to that.
Gary Morsches
Yes, again we came out of 2008 with a very strong first quarter. The market fundamentals were totally different than where they are in 2009. We do expect to see more normal pricing come in, more normal volatility across the PJM fleet.
With that we will be able to capture the margins that we've done year on year around fuel switching, around optimizing our assets, and our gas remarketing around our contracted natural gas storage and transport positions.
Paul Patterson – Glenrock Associates
Okay, with the novation of those contracts that you mentioned with Morgan Stanley, I read in the 10-Q that there was a $25 million fee that was going to be amortized in declining amounts over the life of the arrangement, could you give us a feeling as to what that impact is for 2009?
Joseph Rigby
I think John can probably respond that that.
John U. Hoffman
Yes, hi this is John Hoffman, the cost that we took in the first quarter for that transaction was about $3 million pre-tax so we expect to see that for the remainder of the year.
Paul Patterson – Glenrock Associates
So, you had a $3 million hit, is that right, in the quarter and that's going to come back for the rest of the year?
John U. Hoffman
No, no, no, we expect that level to continue through the rest of the year.
Paul Patterson – Glenrock Associates
Okay, but did you guys – okay I got you. So, when we look at this $25 million number over the space of 2009 through 2011, it sounds like I guess $3 million a quarter, is that right, or is it $3 million for the rest of the year?
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