We intend to reserve $5.5 million associated with PX Index-based deals with third parties that we did in January.  The $5.5 million represents the amount by which we underpaid some of our services customers relative to the PX index.  NO P&L IMPACT.  Amounts currently sitting as annuities in Enpower.  We should release this reserve when the California refund case is completed and new/final PX MCPs are published by FERC.

The story goes like this ... We typically buy power from our services customers at a PX Index price.  Throughout January we entered PX Index based purchases from our services customers into Enpower.  At the same time, Foster was negotiating a certain $150/MWh payment to our customers given all of the noise around the PX, the weird prices that it was printing, and the $150/MWh soft price cap that FERC had in place.  We settled with our customers based on the $150 value.  Most of our customers were fine with this.  To do this we entered annuities into Enpower for the difference between the PX price and the $150 price.  These annuities have been "hanging out there" since January.  We should have run those annuities through the books and reserved the amount when we settled with our customers (I am assured by Foster and Postelthwaite that we have properly settled with our customers).  Somewhere between our middle market team and our risk group in Portland the annuities were never run through the books (you may recall that we lost two of our three people on our risk desk at this same time).  Foster or Wolfe should have caught this.

Let me know if you have any questions or concerns.

 -----Original Message-----
From: 	White, Stacey W.  
Sent:	Wednesday, October 31, 2001 5:49 AM
To:	Belden, Tim
Subject:	FW: Reserve (Schedule C) for PX deals

Just double checking that you have already talked to Lavo about these.

Thanks,
Stacey

 -----Original Message-----
From: 	Law, Samantha  
Sent:	Tuesday, October 30, 2001 8:09 PM
To:	Greene, Tracy; Belden, Tim; Foster, Chris H.; Mallory, Chris
Cc:	Postlethwaite, John; White, Stacey W.
Subject:	Reserve (Schedule C) for PX deals

Dear all,

Just a heads-up to everyone, the Risk will reserve $5,518,289.90 on 10/31/01 in the ST-CA books regarding the following four annuity deals:

#566310	$1,885,593.81
#566307	$1,383,042.10
#566313	$1,539,749.09
#566377	$   709,904.90
Total		$5,518,289.90

As discussed earlier, since these deals have never come through to ST-CA book, we will give this value back to ST-CA while reserving it at the same time. Therefore, there will be NO P&L impact for ST-CA. 

Tracy,

We are treating this just like the way we discussed in the last email (10/24). Therefore, you should be able to take them out from the LTD report in Nov.

Please let me know if you have any questions.

Samantha Law
EPMI West Power Risk Management
503.464.7248