fyi
 -----Original Message-----
From:  "Witalis, Lawrence (Law)" <LCW4@pge.com>@ENRON 
[mailto:IMCEANOTES-+22Witalis+2C+20Lawrence+20+28Law+29+22+20+3CLCW4+40pge+2Ec
om+3E+40ENRON@ENRON.com] 
Sent: Monday, April 30, 2001 5:38 PM
To: Tribolet, Michael
Subject: RE: PG&E and Enron Stand-Still Agreement

Thanks, Michael.  By the way, can you confirm for me that Elizabeth's draft
really captures Enron's version of what we "agreed to" at our meeting?  It
looks off to us, and I wonder if it does to you, also.  I don't mean to go
around Elizabeth in asking this; just curious.

 ----------
 From:  Michael.Tribolet@enron.com[SMTP:Michael.Tribolet@enron.com]
 Sent:  Monday, April 30, 2001 3:27 PM
 To:  LCW4@pge.com
 Subject:  RE: PG&E and Enron Stand-Still Agreement

 I pasted the letter below:


                         Enron Power Marketing, Inc.
                              1400 Smith Street
                            Houston, Texas 77002

 VIA FACSIMILE

 _______, 2001


 Pacific Gas & Electric Company
 77 Beale Street
 San Francisco, CA

 Attention: [                  and Lawrence C. Witalis]


      Re:  Contract Termination Payment Calculation Discussions

 Dear Sirs:

           As you know, pursuant to its rights under the Master Power
 Purchase Agreement between Enron Power Marketing, Inc. ("EPMI") and
Pacific
 Gas & Electric Company ("PG&E) (collectively, the "Parties"), dated
October
 9, 2000 (the "MPA"), EPMI elected to terminate the 3 power
transactions
 thereunder as a result of the bankruptcy filing made by PG&E on
April 6,
 2001. Such notice of termination was delivered to PG&E on April 9,
2001.
 Additional contract terminations either became effective
automatically as a
 result of PG&E's bankruptcy filing under the terms of the particular
 contract or were elected by certain affiliates of EPMI, namely Enron
Canada
 Corp. ("ECC") and Enron North America Corp. ("ENA"), as provided in
the
 relevant termination notices furnished by ECC and ENA to PG&E.
EPMI, ECC
 and ENA are referred to collectively herein, as appropriate, as
"Enron,"
 and the various contracts and/or transactions thereunder between
PG&E and
 Enron that were terminated are referred to as the "Contracts."

           Pursuant to such contract terminations, Enron provided
written
 notice to PG&E, as reflected in a letter dated April 24, 2001
(including
 all applicable supporting materials and calculations), of the
applicable
 termination payment calculations due and owing to Enron or PG&E, as
the
 case may be, under the Contracts.  Under each of the Contracts, once
the
 non-defaulting party, in this case Enron, furnishes the calculations
of the
 termination payments, the defaulting party, in this case PG&E, is
obligated
 to notify the non-defaulting party within a specified time frame
whether it
 disagrees with the non-defaulting party's termination value
calculations.
 For example, under Section 5.5 of the MPA, PG&E (as the defaulting
party
 due to its bankruptcy) is obligated to furnish EPMI within 2
business days
 of receipt of EPMI's calculations a detailed explanation of any
dispute it
 may have with Enron's termination payment calculations.  The other
 Contracts provide for different time periods by which the defaulting
party
 must respond to the non-defaulting party's calculations.

           At our meeting on April 25, 2001, we agreed to extend the
time
 period by which PG&E must provide notice to Enron of its dispute, if
any,
 with the termination calculations furnished by Enron under any of
the
 Contracts (a "Dispute Notice") in order to permit further
discussions
 between the Parties (the "Settlement Discussions") concerning (1)
the
 methodology and/or procedures employed by Enron to make such
calculations
 and the supporting material therefor and (2) a possible settlement
between
 the Parties with respect to the amount and nature of the Parties'
claims
 under the Contracts and the treatment thereof on an aggregate basis.
In
 order to provide the Parties with sufficient time to negotiate a
possible
 resolution, the date by which PG&E shall be required to furnish any
Dispute
 Notice shall be extended to [May 25, 2001] (the "Initial Extension
 Period"), or such later date as may be agreed by the Parties,
including any
 extension as may be effective during the period that any settlement
 agreement that may be executed by the Parties in connection herewith
 ("Settlement Agreement") may be under consideration by the
Bankruptcy
 Court.

           During the Initial Extension Period, Enron agrees to
maintain in
 full force and effect for the benefit of PG&E all five letters of
credit
 with respect to its obligations under the MPA (including the letters
of
 credit from Banca di Roma, in the amount of $7,000,000; from Banca
 Commerciale Italiana, in the amount of $5,750,000; from Bayerische
Hypo-und
 Vereinsbank AG, in the amount of $30,000,000; and from Banca
Nazionale del
 Lavorno, in the amounts of $44,000,000 and $13,500,000,
respectively),
 subject to the rights of EPMI to replace or provide substitutes for
such
 letters of credit, to assure payment by Enron of the termination
payment,
 if any, due from it to PG&E under the MPA.  In the event that the
 Settlement Discussions have not resulted in the execution of a
Settlement
 Agreement by [May 15, 2001], but the Parties are continuing to
negotiate in
 good faith with respect thereto, Enron agrees to extend for a period
of no
 less than __ days any letter of credit that shall be due to expire
within
 __ days after the end of the Initial Extension Period and Enron
shall
 promptly provide PG&E with confirmation of such extension.  In the
event
 that the Parties successfully conclude a Settlement Agreement and
such
 agreement is submitted to the Bankruptcy Court for approval, the
Parties
 anticipate that (1) such Settlement Agreement will include a
provision
 requiring the maintenance of letters of credit by Enron during the
period
 the Parties are awaiting Bankruptcy Court approval and (2) the
aggregate
 amount of the letters of credit will be reduced, as mutually agreed
by the
 Parties, to more closely match the agreed-upon amount of the
settlement
 amount due from Enron.

           In the event, for any reason, the Parties cannot reach
closure on
 a Settlement Agreement, or any such Settlement Agreement is agreed
to by
 the Parties but ultimately is not approved without modification by
the
 Bankruptcy Court, and thereafter PG&E issues to Enron a Dispute
Notice
 under the MPA, PG&E shall not make, or cause to be made, a draw
under the
 letters of credit securing Enron's payment obligation under the MPA
until
 (1) the amount of the applicable termination payment due to PG&E has
been
 finally determined pursuant to the terms of the MPA and (2) Enron
shall
 have failed to make payment required by it pursuant to Section 5.4,
subject
 to Section 10.12.

           The Parties further acknowledge that, in connection with
the
 Parties' desire to attempt to negotiate the terms of a Settlement
 Agreement, the Parties anticipate that they will simultaneously
commence
 negotiations concerning new master gas purchase and sale agreements
 pursuant to which ENA and EEC, respectively, would sell and PG&E
would
 purchase natural gas, including under term (as opposed to only
daily)
 transactions to the extent mutually agreed by the Parties.
Notwithstanding
 the foregoing, neither PG&E nor Enron shall be obligated to enter
into any
 such agreements or transactions, it being acknowledged and agreed by
the
 Parties that any decisions or commitments with respect thereto shall
be
 subject to the sole discretion of each of the Parties and no
contract or
 commitment shall occur or be deemed to have occurred until the
applicable
 terms and conditions have been agreed to and definitive agreements
have
 been executed by the Parties.



           If the foregoing accurately reflects our mutual
understandings,
 could you please execute a copy of this letter and return it to me
via
 facsimile at your earliest convenience, with a hard copy by
overnight mail.
 Thank you.


                                    Yours truly,


                                    William  Bradford


 AGREED AND ACCEPTED:

 Pacific Gas & Electric Company

 By:  _______________________

 Title:    _______________________

 Date:     _______________________














 cc:  [PGE People]
 Michael Tribolet (Enron)
 Elizabeth Sager (Enron)
 Lisa Mellencamp (Enron)
 James Lopes (Howard et al)
 John Klauberg (LeBoeuf, Lamb)
 Bennett Young (LeBoeuf, Lamb)



     -----Original Message-----
    From:   "Witalis, Lawrence (Law)" <LCW4@pge.com>@ENRON

[mailto:IMCEANOTES-+22Witalis+2C+20Lawrence+20+28Law+29+22+20+3CLCW4+40pge+2
Ecom+3E+40ENRON@ENRON.com]


    Sent:   Monday, April 30, 2001 4:35 PM
    To:     Witalis, Lawrence (Law); Sager, Elizabeth
    Cc:     'byoung@llgm.com'; Sena, David; Wan, Fong (Corp);
              'jklauber@llgm.com'; 'jlopes@hrice.com'; Foley, Jack;
Bar-Lev,
              Joshua (Law); Pearce, Karola (Law); Harvey, Kent; Kuga,
Roy;
              Bradford, William S.; Tribolet, Michael; Mellencamp,
Lisa
    Subject:  RE: PG&E and Enron Stand-Still Agreement

    Elizabeth:

    Four points.  First, I can't call up an attachment to your
e-mail; can
    you
    please resend it?  Second, I believe that the PG&E and Enron
    representatives
    at the meeting agreed that Enron would keep the LCs in place
    month-to-month
    for the entire period until a settlement is reached and approved
by the
    Bankruptcy Court; of course, if negotiations break down, that
    month-to-month
    requirement could end, but the LCs were a principal comfort point
for
    PG&E
    going forward, and your changes in this portion of the draft may
be
    unacceptable to us (again, I'll have to review them to be
certain).
    Third,
    I recall that we agreed generally, if not specifically, that we
would
    give
    ourselves breathing space to reach an agreement, without an
    artificially-imposed "window" as you call it, and I do not think
such a
    window is advisable at this time; PG&E is perhaps even more eager
than
    Enron
    to resolve the Termination Payment issue, and our discussions can
always
    be
    truncated if talks stall, but I do not think such windows do much
to
    promote
    cooperative efforts generally.  Fourth, I think PG&E was very
clear in
    its
    expectation that, as part of these discussions, Enron would both
enter
    into
    new Master Agreements with PG&E and into sales of gas on
commercially
    reasonable terms.  I recall no disagreement from anyone on
Enron's side
    of
    the table to this proposition, and think the draft I sent to you
    captures
    the gist of what PG&E would like to see.

    Admitterdly, without reviewing the mark-up I'm shooting blind a
bit
    here.  I
    mention these points mainly as background for my request that you
check
    in
    with the Enron reps who attended the meeting to see if perhaps
your
    comments
    are off the mark.  After I've read your mark-up and you have done
this
    minor
    bit of due diligence, we can talk, tomorrow hopefully, in an
attempt to
    resolve whatever differences we actually may have on the terms of
the
    stand-still agreement.  I very much hope any such differences are
more
    minor
    than your comments suggest, as otherwise this might not be a very
good
    start
    for our clients' efforts to reach an amicable resolution.

    I look forward to talking tomorrow.  Please suggest a time.

    Thanks.

    Larry

       ----------
       From:
Elizabeth.Sager@enron.com[SMTP:Elizabeth.Sager@enron.com]
       Sent:  Monday, April 30, 2001 10:14 AM
       To:  LCW4@pge.com
       Cc:  'byoung@llgm.com'; Sena, David;
'elizabeth.sager@enron.com';
    Wan, Fong (Corp); 'jklauber@llgm.com'; 'jlopes@hrice.com'; Foley,
Jack;
    Bar-Lev, Joshua (Law); Pearce, Karola (Law); Harvey, Kent; Kuga,
Roy;
    William.S.Bradford@enron.com; Michael.Tribolet@enron.com;
    Lisa.Mellencamp@enron.com
       Subject:  Re: PG&E and Enron Stand-Still Agreement



       Larry:  In accordance with our conversation late last week, I
am
    enclosing
       a revised draft of the proposed standstill agreement that was
    discussed on
       Wednesday.  My comments primarily involve the following:

       (1)  As you and I discussed last week,  I thought it made
sense to
    specify
       a reasonable date by which Enron and PG&E shall have reached
closure
    on a
       settlement agreement on the contract termination and related
claims.
    I
       proposed a one month period to do that.  If the parties can't
come
    to an
       agreement in that time period, then the "mechanics" in the MPA
for
       resolving a dispute dealing with the calculation of the
termination
    payment
       would be "reactivated."  Obviously, if we are making progress,
the
    parties
       can always extend the date.  I felt it was appropriate to
specify
    the
       window period to make sure that everyone is focused on
attempting to
    get a
       prompt resolution.  Assuming a final settlement agreement is
agreed
    upon,
       the conditions of the extension of the "stay" would be
embodied in
    the
       settlement agreement itself  (as opposed to this letter).

       (2)  Enron agreed at the meeting that it would keep the LCs in
place
    while
       the parties were working to see if a settlement agreement
could be
    reached,
       and that requirement is reflected in our revisions to the
letter.
    Thus,
       the revised letter provides that Enron will do this for the
"Initial
       Extension Period" (i.e., to May 25, 2001).  Your draft had
provided
    that
       Enron would be required to keep the LCs in place even if no
    settlement
       agreement were to be reached.  My view is that any requirement
to
    maintain
       the LCs beyond the Initial Extension Period and any conditions
with
    respect
       thereto, if agreed to by Enron, should be part of the final
    settlement
       agreement executed by the parties, rather than as part of this
    letter.
       Also, we note that, as a contractual matter, the MPA does not
    require the
       non-defaulting party to keep in place any security in favor of
the
       defaulting party when, as a result of a termination, the
    non-defaulting
       party owes a payment to the defaulting party.  See Sec. 5.5.

       (3)  Your draft of the letter provided that Enron "agrees" to
enter
    into
       new master gas agreements and consummate term transactions on
    "commercially
       reasonable terms."  The revised letter specifies that Enron
agrees
    to
       negotiate with PG&E in these respects simultaneously with the
    negotiations
       towards a settlement agreement, but any commitment on Enron's
part
    to
       effect a contract or transaction with PG&E will only arise as
a
    result of
       the parties' execution of the definitive transaction documents
(as
    opposed
       to this letter), the execution of which shall be in the sole
    discretion of
       each of the parties.


       Please call me at your convenience to discuss any questions on
the
       foregoing or on the revised letter.  Thanks in advance for
your help
    in
       moving this forward.


       Elizabeth Sager
       713 853 6349

       (See attached file: Standstill.doc)






                           "Witalis,

                           Lawrence             To:
    "'elizabeth.sager@enron.com'" <elizabeth.sager@enron.com>
                           (Law)"               cc:
    "'jklauber@llgm.com'" <jklauber@llgm.com>, "'byoung@llgm.com'"
                           <LCW4@pge.com        <byoung@llgm.com>,
    "'jlopes@hrice.com'" <jlopes@hrice.com>, "Kuga, Roy"
                           >                    <RMK4@pge.com>, "Wan,
Fong
    (Corp)" <Fong.Wan@pge-corp.com>, "Sena, David"
                                                <DJSt@pge.com>,
"Foley,
    Jack" <JRFc@pge.com>, "Pearce, Karola (Law)"
                           04/25/2001           <KKP2@pge.com>,
"Harvey,
    Kent" <KMH5@pge.com>, "Bar-Lev, Joshua (Law)"
                           07:23 PM             <JXB7@pge.com>

                                                Subject:
Stand-Still
    Agreement






       Ms. Sager:

       Attached is my draft of an agreement memorializing the
parties'
    respective
       commitments as we negotiate the amount of the Termination
Payment
    and of
       other claims Enron may have against PG&E in Bankruptcy Court.
I do
    not
       have
       your mailing address; yet, PG&E would like to receive
assurance soon
    that
       Enron agrees with the terms of this proposed letter agreement.
    After
       reviewing the draft, please indicate Enron's agreement by
return
    e-mail to
       me.  Or, please call me (415-973-3817) to discuss.

       Thanks.

       Larry Witalis

        <<enron.doc.rtf>>

       (See attached file: enron.doc.rtf)

       <<File: Standstill.doc>><<File: enron.doc.rtf>>