Background: Because of the situation that has arisen with ConEd (NY) rejecting our parental guaranty and asking EES to put up a 1 million dollar LC, bond, or cash for our retail operations behind ConEd; and in the light of the ongoing financial issues and credit downgrades facing Enron, it has become necessary to evaluate our positions
and available options in various markets relative to creditworthiness issues, and the continued ability of EES to serve customers behind specific utilities.
For Texas this evaluation is important given the outstanding success of the TX team in enrolling customers and the contracts and volumes currently outstanding.
This analysis will focus on the present credit rating of Enron, and consider any possible further down grades.


Enron's Current Credit Rating of BBB and Baa2
1.  To remain a credit worthy counter party within the provisions of the Tariff for Retail Service, EES must have and maintain a long term unsecured credit rating of not less than BBB- or Baa3. 

2.  Pursuant to Art 4.4.5 of the Tariff for Retail Service, EES has an obligation to pay to the TDSP (Wires Company) all invoiced delivery charges 35 calendar days after invoicing, (plus a 10 day grace period - total 45 calendar days) regardless of whether or when it receives payment from the customer. 

3. Under Art. 4.5.1 of the Tariff for Retail Service, a TDSP shall not require deposits from EES as long as we remain current on our obligations for the T & D portion of the bill.
( a deposit can only be required if a REP has defaulted within the past 24 months).

4. In the event that EES defaults, we will be required to provide a deposit. Required deposit is 1/6th (one-sixth) of the estimated annual billable amount for the wires charges.
Alternatively, we could at our option, choose to provide a cash, surety bond, LC, parent guaranty or any combination of these. Additionally, EES can negotiate with the relevant TDSP to reach a mutually suitable agreement.

5. EES is not rated and technically can be required by any TDSP in TX,  to provide security today. If such a request is made, a parental guaranty from Enron corp will suffice, given our current rating of BBB and Baa2 by Moody's and S& P. However, if Enron Corp is downgraded below the required tariff level, the following will be applicable:

Enron's Credit Rating goes below BBB- or Baa3
1. EES will be required to provide a deposit for wires charges.

2. Deposit will be 1/6th of the estimated annual wires charges of the relevant utility, and will be in the nature of bonds, LC, or cash.

3. Failure to provide or maintain acceptable creditworthiness could result in the following:
	- Request to the Commission for suspension or revocation of EES's license to market in TX
	- Transfer of the billing and collection responsibility for all EES charges to the POLR, with customer payments allocated first to wires and non-bypassable chares, 	and remainder to EES
	- Transfer of customer payments to a lock box controlled by the TDSP, with payments allocated first to wires and non-bypassable charges
	-Transfer of EES's customer to another REP or to the POLR.
4. Legal remedies.

Transition Charges: (Art 4.5 of the Tariff, Schedule TC to the Tariff, and Chapter 25.108 of the  Rules). 
1. For TDSPs that are subject to a PUC financing order (Reliant, TXU and CP&L), EES will bill and collect (on behalf of the bond servicer) transition charges from its (EES's) customers

2. Payments of transition charges to the servicer are due from EES 35 calendar days from bill date with a 10 day grace period.

3.  EES is required to provide seperate security for transition charges. 

4.  EES must have and maintain a long term unsecured credit rating of not less than BBB- or Baa3 from Moody's or S&P, or provide
	- a cash deposit of 2 months maximum expected transition charge collections
	- an affiliate parent guaranty, surety bond, or LC for the 2 month amount
	- or a combination of the above.

5. EES is not rated, so technically we may be required to provide the security today. If such a request is made, a parental guaranty from Enron corp will suffice, given our current rating of BBB and Baa2 by Moody's and S& P.

6. If Enron Corp is downgraded below BBB or Baa3, that will trigger a request for deposit or other security.

7. Upon request for a security for transition charges, EES must provide required security within 10 calendar days.

8. Upon failure to provide or maintain required security, the consequences outlined in the previous section will result.

9. To avoid all these, EES could contract with the TDSP to bill and collect transition customers fro EES's customers.