Sally -

I think we probably need to meet about this today.  (Peggy, Beth (Shona),  and myself).  Apparently,  the Canadian power trader has been building a very large gas position over the last two weeks.  There are two issues in my view:

1.) Canada set up post ID's to run through enpower and not pick up the positions on the gas side in US dollars.  We are therefore unable to capture the positions for a net Natural gas position.

2.)  These gas books were set up, and somewhere the communication broke down between Canada,  the controls group,  and my group.  Clearly,  we have to put new procedures in place if 150 bcf short can just "slip through the cracks."


---------------------- Forwarded by Jeffrey C Gossett/HOU/ECT on 05/10/2001 07:29 AM ---------------------------
From:	Frank Hayden/ENRON@enronXgate on 05/09/2001 05:41 PM
To:	David Port/ENRON@enronXgate
cc:	Vladimir Gorny/ENRON@enronXgate, LaCrecia Davenport/ENRON@enronXgate, Chris Abel/HOU/ECT@ECT, Jeffrey C Gossett/HOU/ECT@ECT 
Subject:	Canada

Canada has a very large natural gas position that appears to have not been captured in value at risk. (Approx short 150bcf price, a total short 250bcf if we include the basis leg.)  For example, the gas desk alone has a total position for today of short 283bcf, Zufferli nearly 50% of the total position
  
We simulated ad hoc VAR, and looking at the NYMEX position alone VAR is approx $7MM.
Added to Canadian power VAR,  risk is approx. $13MM, it adds about $3MM of risk to the entire power portfolio.

However, to the gas portfolio it adds approx. $6MM of risk, giving us a VAR of $87.5, a limit violation had it been captured and included in VAR.

I'm unclear as to how books can be created and yet not mapped into VAR.



Frank