Rob:

I appreciate your getting up to speed quickly with Lisa, Stacey & Mary in my group on the comments they are working to draft and submit on Ontario's emissions trading proposal.  Sorry to hit you with something else on the environmental front, but ENA has asked us for some potential assistance in monitoring/advocacy of future environmental regulations that could affect the Alberta PPAs -- either the deal in its current form or future efforts to sell the PPA.  My group and a number of others in the Enron environment, health and safety (EHS) department have worked on the Alberta PPA deal in the past, due to the fact that costs related to environmental regulation can be passed through to Enron.  Mike Macphee of ENA contacted us about how Enron could best look after potential environmental impacts on an ongoing basis, and I promised to first talk with Canada Govt. Affairs before proceeding, so we could work out how best to handle the issues.

Issue Summary:

Without boring you with details, ENA has discussed with utility TransAlta as well as other PPA buyers the potential for increased environmental regulation that could require additional capital costs for generators that would be passed down to PPA buyers. This includes possible Canada-wide regulation of mercury, additional cuts in NOx and SO2, longer-term actions on CO2 to combat climate change, and even a "multiple emissions reduction strategy" that could include some or all of these. Marc Phillips and Gus Eghneim of Enron EHS have worked with ENA to provide technical analysis of potential impacts of different regulatory scenarios.  Where our group comes in is determining the best advocacy strategy to shape those scenarios and helping ENA form the best business strategy from there.

TransAlta participates in the "Clean Air Strategic Alliance" (CASA) group, which will likely develop a regulatory proposal that can be negotiated and agreed upon with the government.  ENA is worried that TransAlta may not best represent the PPA buyers interests in this process.

Action Items:

1)  ENA wants to know what kind of position they should take to best protect its interests.  Our group can definitely take the lead on developing a sound position & strategy, based on what we've done in the U.S. and elsewhere, and what we've proposed in Ontario.  We'll start to formulate some basic ideas now, and can provide greater detail at critical points in the CASA or government policy development process.

2)  ENA wants to know who will perform monitoring and advocacy on this issue.  This is where you and I need to discuss resources, etc.  ENA does not feel it cannot commit any staff resources to monitor.  My group has substantive abilities on environmental issues, but logistically, its tough for me to send someone to Canada consistently to cover meetings.  In my previous discussions with Aleck, he indicated that he did not have the time/resources to learn and cover environmental issues.  Particularly on Ontario emissions trading, it seems that a "team" approach has worked well, and it may here as well.  Aleck and I had also discussed hiring outside consultants for monitoring some issues, but that may now be limited in these trying financial times.  

Let's try to have a call to discuss this issue, particularly #2, sometime this week if possible.  Please suggest times that would work for you.  Tuesday 10/2 is bad for me, as is Thursday morning 10/4.

Hope you're doing well & look forward to talking with you.  Thanks --

Jeff

Jeff Keeler
Director, Environmental Strategies
Enron Corp
(203) 245-0828 office
(203) 464-1541 cell