----- Forwarded by Richard B Sanders/HOU/ECT on 04/25/2001 07:20 AM -----

	"Cregan, Nora" <ncregan@mdbe.com>
	04/01/2001 05:43 PM
		 
		 To: "Sanders, Richard" <richard.b.sanders@enron.com>, "'mcohen@ggfcmk.com'" 
<mcohen@ggfcmk.com>, "'ghenken@ggfcmk.com'" <ghenken@ggfcmk.com>, 
"'rcarroll@bracepatt.com'" <rcarroll@bracepatt.com>, "Lubic, Michael" 
<MLubic@mdbe.com>, "Burns, David A. Esq." <David.Burns@bakerbotts.com>
		 cc: "Jines, Michael" <mike-jines@reliantenergy.com>, "Sheryl Gussett 
(E-mail)" <Sheryl.gussett@reliantenergy.com>, "Pickett, Donn" 
<dpickett@mdbe.com>, "Houlihan, Terry" <thoulihan@mdbe.com>, "Morrissey, 
John" <JMorrissey@mdbe.com>, "McManus, Randy" <rmcmanus@bakerbotts.com>
		 Subject: Revised inverse condemnation complaint



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Attached for your comments is a revised complaint in inverse condemnation, 
with the PX and Reliant as plaintiffs.? I am sending it separately to Susan 
Rossi, in-house counsel for the PX.? Since our last conference call we've 
discussed the various forums and pending actions with FERC counsel for 
Reliant and Enron. My understanding is that the PX wants us to act and will 
cooperate with us.? 

Marc, I haven't circulated this to the whole group because I wanted to go 
through you.? What is the appropriate next step?? A call with the 
decisionmakers on this issue so that we can make a plan to move forward?? Can 
we do that Monday or Tuesday?

I've set out Reliant's conclusions here.? 

1. There is no forum other than California state court in which we can get 
compensation for the commandeered contracts because of the Eleventh Amendment 
issue.

2. Filing the inverse condemnation action is not inconsistent with the FERC 
proceeding in Tucson Electric. 

3. Filing the inverse condemnation action is not inconsistent with Duke v. 
Davis or with any other proceeding anyone may want to bring alleging that the 
commandeering itself was illegal (e.g. on preemption grounds).

4.? As we discussed, nobody (including PG&E and SCE) wants the Board of 
Control to be deciding anything if we can avoid it.? We would suggest going 
along with the PX's suggestion that the bankruptcy court should be staying 
the Board of Control action because of the interventions of SCE and PG&E, who 
are taking the position that the compensation should go to them.? Then, we 
can go forward with the inverse condemnation action in state court (we picked 
LA as the forum because LA residents are less affected by the energy crisis 
than most others in the state, and because it's convenient). If PG&E and SCE 
are permitted to intervene in the state court action, we can stipulate to 
relief from stay so that it can go forward.? This way, the Board of Control 
is effectively stayed while the state court action goes forward.

5.? Richard Sanders expressed the very real concern that we don't want SCE 
and PG&E's defenses to liquidation of the block forward contracts to be 
decided anywhere but FERC.? We think we should be able to avoid that: since 
SCE and PG&E have already put the issue squarely before FERC, that defense 
could be stayed under the primary jurisdiction doctrine pending FERC's 
decision.? We would argue that the whole case need not be stayed in the 
meantime, since the governor's duty to compensate holds no matter who is owed 
the compensation, and any proceeds from PX contracts will be funneled into 
the Moreno escrow account.

6.? As we also discussed, we can file this complaint in the name of the PX, 
Reliant, and any other market participants who want to be plaintiffs (we just 
need names and a few facts to allege for each plaintiff). Or, as someone 
suggested, if the PX Market Participants Committee is an entity that has 
standing, it could be filed in that name along with the PX.? Either way, the 
prayer for relief asks that all funds be deposited in the Moreno escrow 
account for disposition consistent with FERC's decision in Coral Power.

? 
 - 21315587_2.DOC