At Brent's request, I am sending you the memo below.
----- Forwarded by Tana Jones/HOU/ECT on 10/31/2000 09:41 AM -----

	Molly Harris
	10/18/2000 06:37 PM
		
		 To: Meredith M Eggleston/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Paul 
Smith/HOU/EES@EES, Karen A Cordova/HOU/EES@EES, James E Keller/HOU/EES@EES, 
Timothy J Hamilton/HOU/EES@EES, Eric Melvin/HOU/EES@EES, Evan 
Hughes/HOU/EES@EES
		 cc: Tana Jones/HOU/ECT@ECT, Allison McHenry/HOU/EES@EES, Larry Joe 
Hunter/HOU/ECT@ECT, William S Bradford/HOU/ECT@ECT, Ted Murphy/HOU/ECT@ECT, 
Vicki Sharp/HOU/EES@EES, Wanda Curry/HOU/ECT@ECT, Michael 
Tribolet/Corp/Enron@Enron, David Gorte/HOU/ECT@ECT, Vladimir Gorny/HOU/ECT@ECT
		 Subject: Springs SWAP Confirmations


From a Credit perspective, I informed Allison that credit provisions are not 
required for these particular deals since I learned of the trades 2 days ago 
(after the deals had been executed without our approval upfront).   Credit 
believes it does not make sense to execute stand alone financial deals.  
These deals should be executed as amendments to the pricing component of the 
physical contracts (i.e., a restructuring).  This process would mitigate the 
operational, credit and legal risks of this proposed business.  My 
understanding of the business strategy of EES is to enter into financial 
transactions to hedge the portfolio, not to execute financial trades with end 
users.  Please advise if the legal position is changing.

Assuming we are unable to achieve the aforementioned solution, these deals 
raise more significant issues regarding support and control of new business 
endeavors for EES which already has significant infrastructure and control 
issues.  It raises issues to be resolved on:

Credit approval and monitoring
Credit provisions
Legal support in EES with financial and ISDA experience
Netting issues and additional credit risk from having multiple masters with 
our clients (physical and financial)
Execution of masters post trade execution
Capturing and monitoring these OTC financial trades separate from financial 
settlements of physical trades
Managing portfolio position risk
Operational issues capturing and properly valuing the trades
Operational support for confirmations and ensuring timely execution


In short, we need to establish processes to support this business.  I will 
set up a meeting with relevant parties to discuss further.

In respect to the attached confirmations for Springs, additional questions 
should be raised with regard to operational/billing and legal implications 
for consolidated billing of financial and physical invoices.  This has been 
specified in the payment date.  Is EES capable of accomplishing this 
operationally today?  Doesn't this raise legal issues of consolidated billing 
and settlements under two different contracts which do not stipulate netting 
(physical with financial)?

Regards
Molly



From: Tana Jones on 10/18/2000 12:37 PM
To: Allison McHenry/HOU/EES@EES
cc: Karen A Cordova/HOU/EES@EES, Larry Joe Hunter/HOU/ECT@ECT, Marianne 
Castano/HOU/EES@EES, Molly Harris/HOU/ECT@ECT, Paul Smith/HOU/EES@EES 
Subject: Re: Springs SWAP Confirmations  

I'm sure you all know this by now, by Molly Harris had told me this deal does 
not need any additonal credit terms added.



	Allison McHenry@EES
	10/17/2000 05:35 PM
		 
		 To: Marianne Castano/HOU/EES@EES, Karen A Cordova/HOU/EES@EES, Paul 
Smith/HOU/EES@EES, Tana Jones/HOU/ECT@ECT
		 cc: molly.harris@enron.com, Larry Joe Hunter/HOU/ECT@ECT
		 Subject: Springs SWAP Confirmations

Attached are the most current versions of the Springs SWAP Confirmations, 
with changes suggested by Joe Hunter, and Annex A. Molly advised us not to 
send the confirmations noting Credit Provisions would follow. Tana has 
offered to help us draft the Credit attachment if we give her the details. 
Again, I am turning my file over to Karen Cordova while I am on vacation, and 
the confirmations are located under J:\Legal\SWAPs\Sales. Thanks and see you 
on the 25th.