Steve and Bob,

There is a clear assumption in the email history below that suggests that there is a relationship between EFS buying the existing projects under the GSA contract and a potential adverse affect on the GSA commodity portion of the commodity risk book.  This is not the case.  The potential adverse affect on the commodity risk book would exist regardless of whether or not EFS bought the projects.  That is, if there were no change to the internal structure of the contract and EES went forward as if nothing had happened, then the issue of this potential adverse affect would still exist.  It would exist as an internal EES problem which would have to be resolved because we have an existing contract with the VA.  This commodity risk issue would not exist only if we were going to terminate all the VA projects.  But, as far as I know, there has never been serious consideration to terminating the projects....if for no other reason we have no right to unilaterally terminate.  Only the government has that right.

The important point here is that this issue is not an issue pertinent to the indemnification issue.  Whatever needs to be done to complete the indemnification process should proceed uninterrupted.  Once the indemnification has been resolved, then as a separate matter, EES and EFS should address what affect the projects have on the commodity book.  They are separate issues and would have to be resolved independent of any indemnification issue.  

Bottom line is that by relating the two issues (i.e. the issue of the projects' affect on the commodity book with the issue of indemnification), someone has created unnecessary confusion.  

Just thought I'd add my two cents....

Bill 

---------------------- Forwarded by Bill Hatch/HOU/EES on 10/04/2001 02:18 PM ---------------------------
From:	Richard Ring/ENRON@enronXgate on 10/03/2001 09:53 AM CDT
To:	Bill Hatch/EFS/EES@EES
cc:	 
Subject:	FW: GSA Region 1 Projects Transition


Bill,

FYI
 -----Original Message-----
From: 	Ring, Richard  
Sent:	Wednesday, October 03, 2001 9:49 AM
To:	Herndon, Rogers
Subject:	RE: GSA Region 1 Projects Transition

Rogers,

Enron Energy Services Operations, Inc. ("EESO") and General Services Administration ("GSA") entered into an agreement, effective November 1, 1998, which provides for commodity pricing and value added services, specifically related to GSA Region 1 -New England and runs through October 31, 2003.  EESO agreed to provide a "Discount to Standard Offer" commodity price for GSA's "Core Load" associated with facilities in Massachusetts, New Hampshire and Rhode Island at such time as the utilities met certain conditions regarding deregulation (State commission formally approves UDC's restructuring plan and State Commission formally approves the UDC's sale of non-nuclear generating assets).  Individual agencies that have elected to participate under the GSA agreement are: Veterans Administration, Coast Guard, National Parks Service, Internal Revenue Service, Department of Agriculture, National Archives and Records Administration, Hanscom Air Force Base, and Department of Labor, with the total core group consisting of approximately 60 MW's.  The UDC's that have met the above referenced criteria above are Massachusetts UDC's (MECO, BECO WMECO, Fitchburg Gas & Electric, Eastern Utilities, and Commonwealth Electric, Cambridge Electric Company) and Rhode Island UDC (Narragansett Electric).  The only location where EESO currently delivers physical commodity is Massachusetts - BECO, which represent approximately fifty percent of the total "Core Load" or approximately 30 MW's and commenced in October 2000.

The agreement has provided other commodity upsell opportunities such as (i) physical delivery of comodity GSA accounts and Coast Guard accounts in Maine behind Central Maine Power (June 2000 thru October 2003)  and (ii) sale and delivery of "renewable energy" to GSA and Hanscom Air Force Base (October 2000 thru December 2001, with opportunity to extend thru October 2003).

Value Added Services under the agreement has been responsible for (i) solar panel project development and installation (ii) cogeneration project development and installation (in progress) (iii) chilled water project and (iv) maintenance agreement, all which total additional 50-55 million dollars.  EESO had asked GSA to allow the contract to be split between commodity and value added services and GSA refused. A decision was made that would allow Enron Facilities Services (EFS) to perform the value added services portion of the contract, on behalf of EESO.  To the best of my knowledge the cogeneration projects would affect only the Veterans Administration sites, behind Massachusetts-BECO only.  

There is another issue that we can discuss at your convenience which relvolves around the Master Subcontracting Plan and the requirement, in the last two years of the agreement for EESO to spend 1 million each year of the last two years of the agreement utilizing small business concerns, small disadvantaged business concerns, and women-owned small business concerns.

Let me know if you would like to discuss any of the above referenced information.

Regards,

Richard      

 -----Original Message-----
From: 	Herndon, Rogers  
Sent:	Wednesday, October 03, 2001 8:25 AM
To:	Wheeler, Christopher
Cc:	Ring, Richard
Subject:	RE: GSA Region 1 Projects Transition

No acceptance.

This is not enough info for me to accept anything.  We have a process which you will need to follow.  I suggest you talk to Sean Holmes and ultimately EWS' structuring group will have to get comfortable with all/any of the issues before I accept.  I expect better documentation than just an e-mail.

Richard what are the issues - this is the first thing I have EVER heard about this?

Rogers



 -----Original Message-----
From: 	Wheeler, Christopher  
Sent:	Tuesday, October 02, 2001 9:55 PM
To:	Herndon, Rogers; Ring, Richard
Cc:	Longbottom, Eric; Nanof, John
Subject:	GSA Region 1 Projects Transition

Rogers & Richard,

We are in the process of selling (transitioning) the Projects piece of the GSA Region 1 Deal to Enron Facility Services, with the commodity piece to remain the responsibility of EES. We would like to confirm that when EFS completes a project, the resulting reduced consumption figures will not adversely affect your commodity risk position.

Please indicate your acceptance of this transaction by responding to this email.

Regards,

Chris Wheeler