I wasn't wanting to bother you with this as I was handling w/Jordan and co., 
but given our later issue re: the UK positions and Skilling's request for 
component VaR for Agg Enron   (Ted's call to you just know), I'm forwarding 
after all.

Cassandra.
---------------------- Forwarded by Cassandra Schultz/NA/Enron on 12/06/2000 
03:04 PM ---------------------------
   


From:  Cassandra Schultz                                                      
       12/06/2000 01:55 PM	
	
	
	                           
	

To: Michael Kass/EU/Enron@Enron, Chris Abel/HOU/ECT@ECT, James New/LON/ECT@ECT
cc: Oliver Gaylard/LON/ECT@ECT, David Port/Market Risk/Corp/Enron@ENRON, Mike 
Jordan/LON/ECT@ECT, Shona Wilson/NA/Enron@Enron 

Subject: Loss Notification - "Structured Derivatives"

Per discussion with Ted Murphy, P/L related to the Eastern spread options 
should be included in our Loss Notification monitoring in accordance with the 
Risk Management Policy.  However, my understanding is that the positions and 
VaR are captured in European Gas and UK Power, but the P/L is reported 
separately in "Structured Derivatives".  This reporting is perhaps further 
complicated by related prudencey being released in the line item European 
Gas.  

The 12/5 DPR reflects a ($43MM) loss in Structured Derivatives, and Oliver 
indicated this represents the market moving against our Eastern spread option 
position.  This is a Ken Lay level notification by any measurement standards, 
regardless of whether you compare it to the $7,500 VAR limit for Gas, or the 
$15,300 VaR limit for UK Power. Or even split it between them.

Chris, please include this loss in today's notification letters to Ken Lay 
and Jeff Skilling for the 5th.  Per Oliver, the loss was due to power price 
curve shift and gas volatility curve shift against the Eastern spread options.

Going forward, James, perhaps you could work with Oliver and the commercial 
team to determine a reasonable methodology to support the allocation of P/L 
and related DPR reporting  for these positions so we can continue to evaluate 
in compliance with the policy.

Thank you,
Cassandra.