Harry & Nancy --

I am somewhat concerned that the implications of having to act as tax collector is creating a push to change the way REPs work with the T&D company.  In Enron's advocacy throughout my years, we have always asked the PUCs to make the marketer the "customer of record" - better limits the Utility control over the market.  Now it appears that this good decision of the PUCT has tax implications and means that we have to process the taxes.  I don't see that trying to support a change is a good thing from our long-run business.   Moreover, if we are paying Gross Receipts taxes and didn't include them into our customer costs than we made a mistake.  This is a cost of our business.  

Let's talk.

Jim
 -----Original Message-----
From: 	Hetrick, Nancy  
Sent:	Monday, October 01, 2001 7:40 PM
To:	Apke, Beth; Fischer, Jeffrey K.; Adzgery, Ronald
Cc:	Steffes, James D.; Ryall, Jean; Coats, Edward
Subject:	RE: Letter to PUC Regarding Texas Taxes on T&D Services

In my opinion this is not beneficial to EES at all.  We have been following this issue through our Retail Market Subcommittee and all REPS are not happy with this process.  We are now required to calculate, collect and remit all taxes related to T&D charges.  We also take a hit on Gross receipts tax.  Jim, you should call and talk to Ron Adzgery.  Thanks.

Nancy A. Hetrick
Enron Corp.
Director, Government Affairs
Phone:  712-366-3399
Pager:   888-912-1426

 -----Original Message-----
From: 	Apke, Beth  
Sent:	Monday, October 01, 2001 11:00 AM
To:	Fischer, Jeffrey K.; Adzgery, Ronald
Cc:	Steffes, James D.; Ryall, Jean; Hetrick, Nancy; Coats, Edward
Subject:	FW: Letter to PUC Regarding Texas Taxes on T&D Services

Ron and Jeff. 

I spoke briefly with Jim Steffes this morning. Please do not proceed with any further efforts in this regard until we hear from Jim, Nancy or someone from their team.  It may be the Comptroller's position is beneficial to EES's business and we don't want to support or pursue a contrary position.  

beth 



 -----Original Message-----
From: 	Adzgery, Ronald  
Sent:	Friday, September 28, 2001 3:22 PM
To:	Ryall, Jean; Steffes, James D.
Cc:	Hetrick, Nancy; Fischer, Jeffrey K.; Coats, Edward; Apke, Beth
Subject:	Letter to PUC Regarding Texas Taxes on T&D Services

Jean/Jim:

Jeff Fischer and I in EES Tax have been working with Nancy Hetrick regarding the question of whether REPs will be responsible for administering Texas taxes on T&D services.

As you may have heard, at the request of a number of investor owned utilities, the Texas Comptroller of Public Accounts has initially ruled that REPs will be responsible for administering the taxes.  This conclusion was based upon the assumption that the REPs are purchasing the T&D Services from the TDU and then reselling the services to their customers.

After a number of REPs objected to that ruling, the Comptroller's office agreed to reconsider.  We believe the Comptroller is worried about doing something that will have a serious impact on deregulation in Texas, so she is passing the question off to the Texas PUC by requesting that the PUC determine whether REPs purchase and resell T&D Services.

The New Power Company raised this issue with the PUC recently and at last count TXU and Entergy had filed responses of their own.  A number of tax representatives from several REPs thought it might be good to show the PUC this is a significant issue for all independent REPs.

Attached for your review and comment is a draft of a proposed letter to the PUC regarding this matter.  Nancy suggested we send the letter to you for your comments and to get clearance for EESI to sign the letter.  Thank you for your assistance with this.

Ron

 << File: Texas PUC tax response - revised.doc >>