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8 in the MPA for resolving 
a dispute dealing with the calculation of the termination payment would be 
&reactivated.8  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8 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8 (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8 to enter into new 
master gas agreements and consummate term transactions on &commercially 
reasonable terms.8  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







	"Witalis, Lawrence (Law)" <LCW4@pge.com>
	04/25/2001 07:23 PM
		 
		 To: "'elizabeth.sager@enron.com'" <elizabeth.sager@enron.com>
		 cc: "'jklauber@llgm.com'" <jklauber@llgm.com>, "'byoung@llgm.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)" 
<KKP2@pge.com>, "Harvey, Kent" <KMH5@pge.com>, "Bar-Lev, Joshua (Law)" 
<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>>

 - enron.doc.rtf