Wes

Here is current draft of CDWR agreement.  Negotiations are still underway.  
The underlying contract is the EEI Master - let me know if you need that 
standard form.
Call w/ any questions/comments

Elizabeth 
36349
----- Forwarded by Elizabeth Sager/HOU/ECT on 03/20/2001 04:32 PM -----

	"JOHN G KLAUBERG" <JKLAUBER@LLGM.COM>
	03/20/2001 10:18 AM
		 
		 To: jpirog@water.ca.gov
		 cc: cyoder@ect.enron.com, Elizabeth.Sager@enron.com, "MICHAEL W E DIDRIKSEN" 
<MDIDRIKSEN@LLGM.COM>
		 Subject: Revised Draft


John:  as per your request, attached are revised drafts of the Confirmation 
and Cover Sheet, which are blacklined against the respective documents from 
the short-term deal.  I recognize that you are still reviewing certain 
questions/points with CDWR and there may be some items reflected in this 
draft that neither you nor CDWR has "signed off" on.  Nonetheless, in certain 
cases I thought it made sense to provide you with specific contract language 
on some of the points we discussed so that you could clearly see what we may 
be proposing on a particular item.

Please note, in particular, the following:

--on the LD calculation, we reverted to your proposed language on obtaining 
multiple market quotes, etc.  However, after talking to Enron this evening, 
we would like to propose that if quotes cannot be obtained despite the 
parties' good faith efforts to do so, then only in that circumstance would 
the calculation be based on the Non-Defaulting Party's losses.  While, based 
on the product Enron is selling, we anticipate that quotes will be readily 
obtainable, we think it makes sense to revert to the Non-Defaulting Party's 
loss calculation in the highly unlikely event that quotes are not obtainable 
despite using all efforts to do so.  I know that you expressed some 
reservations the other evening that this process potentially could be subject 
to some manipulation.  This is not so.  If CDWR was the Defaulting Party and 
it disputes the loss calculation made by Enron, such dispute would become the 
subject of arbitration.  In such case, the Non-Defaulting Party's would have 
to furnish its historical and current power curves to prove its case.  Since 
those same figures necessarily are needed by Enron to report its trading 
positions on a day to day basis as part of its normal business operations and 
such information feeds directly into its financial reporting statements and 
other relevant financial information, etc. that becomes, in part, part of its 
SEC filings, in a discovery proceeding this information would be very 
transparent.

--with respect to the situs of any arbitration proceeding, Enron strongly 
believes that it is only fair to both parties that this be conducted in a 
neutral site.  The draft provides for New York City, although Enron is open 
to other possible locations.

--the revised draft reflects only the $127/MWh alternative scenario since you 
indicated that, preliminarily, you felt that CDWR would not be likely to 
choose the alternative structure we had discussed.

--we would like to further discuss the effect of an adverse federal 
regulatory change.  I'm sure you can appreciate this in light of the current 
environment, although we would think that freely negotiated bilateral 
contracts would not be subject to the types of changes being discussed.  
Enron is not seeking a termination right with LDs, but would like to further 
discuss a termination right without compensation in the event of a major 
adverse federal development affecting the contract.

--we have dropped our request that Enron have the right to suspend 
performance in the case of a Bond downgrade event.  However, we think it is 
appropriate that if that circumstance occurs, that the due date for payments 
by CDWR should shorten to 7 days and if the Bonds are subsequently upgraded 
that the payment schedule would revert accordingly.

--you requested that we propose a limit on the right of a Non-Defaulting 
Party to suspend its performance in the case of a Default by the Defaulting 
Party.  We included a 60-NERC day limit on such right in the revised draft.  
This is important to Enron as we discussed, particularly in light of Enron's 
acceptance of the 180 day period on the timing of a Termination Payment 
which, as you know, is unheard of in the power sale (or virtually any other) 
arena.  (Nonetheless, we fully understand the position enunciated by the bond 
people on this point).

--on assignment, the Enron commercial people cannot agree to a pre-approved 
right of CDWR to assign the contract to the IOUs.  As we discussed, it may 
very well be the case that at the time any assignment were to be effected 
that Enron may already be at the limit of its overall exposure with those 
counter parties.  It can't be in a position where such an assignment could 
cause it to violate those limits.

--we included an outside date by which Enron must decide whether or not to go 
forward of the first to occur of (1) September 30, 2001 or (2) seven days 
after the Bonds are issued.  You had indicated that CDWR might be willing to 
consider such an "outside date" as long as (i) the $127/MWh pricing was in 
effect from April 1 and (2) Enron had to act very shortly after the Bonds are 
issued.  We have proposed 7 days for this.

--in concept, we probably will be ok with the alternative of securing a 
credit rating for the Fund (as opposed to the Bonds), although we have 
referred that question to the credit people to make sure.

--in light of your response about opinions not being provided by outside 
counsel, we modified the confirmation to request that the opinions could be 
from the AG, or if CDWR cannot do that, then from the GC of CDWR.  We felt 
that this would not involve additional work since these presumably will be 
rendered in connection with the Bonds and we provided that they generally 
would be provided to us after the Bonds are issued.

I think the foregoing represent most of the items we had discussed.  Please 
let me know when you wish to discuss.  Also, it may make sense for our next 
call to have the respective Enron and CDWR commercial folks on the call since 
it may be the case that many of the final decisions involved may be 
commercial ones.

Lastly, please note that while we have discussed most of the points addressed 
in the revised drafts with Enron, in order to expedite the process, we are 
sending these drafts simultaneously to you and Enron.  Thus, it is possible 
that Enron may have further modifications or changes to the documents.

Thanks.  We look forward to working with you to finalize the requisite 
documents.

John


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John Klauberg
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
212 424-8125
jklauber@llgm.com
 - CDWRConf.doc
 - CDWRMaster.doc
 - Conf-bl.doc.rtf
 - Master-bl.doc.rtf