With the first round of RTO filings and responses complete, it is a good time 
to step back and review the highs and lows that occurred in 2000 and lay out 
our plan going into 2001. 

A. 2000 Key Facts --

1. FERC CONTINUES TO RELY UPON MONOPOLIES TAKING VOLUNTARY ACTIONS.

It does not appear that FERC (in its current form) will modify its standing 
policy that RTO formation is a voluntary process designed to let 1,000 
flowers bloom.  While Enron continues to ask FERC and FERC staff to take a 
different position, we have seen no signals that anything will change.  Faced 
with this policy, as the initial RTO filings made clear, almost all utilities 
are going to fight pretty hard not to have to give up their strategic 
transmission assets.  Accordingly, most of the proposed RTOs do not remove 
the fundamental problem - the Native Load exception.

2. THE MIDWEST CAN'T MAKE UP ITS MIND ABOUT WHICH RTO IS BEST.

The MISO continues to lose its members to the Alliance RTO.  The three big 
utilities that have declared their intention to switch sides include ComEd, 
IP, and Ameren (probably 40% of total load in initial MISO).   Key problems 
for the MISO include (a) MISO's not-for-profit status (key IP claim), (b) 
parties interest in taking energy east (key ComEd need), and (c) fair 
retention of 3rd party wheeling revenues (Ameren want).    Meetings with 
regional stakeholders (public power, industrials, State PUCs) have been 
productive in terms of getting agreement that one single RTO is the preferred 
option, however we await action from the FERC.  MISO is also telling everyone 
that can listen that if the big three pull out, it probably won't continue.  
While the MISO process is very open to the public (not so with the Alliance 
RTO), neither MISO nor the Alliance RTO have progressed far enough into the 
details to fully determine if our policy objectives will be met.

3. SOUTHERN AND GRID SOUTH DID PRETTY MUCH AS EXPECTED - NOTHING.

Rather than take a major step forward, Southern and Grid South (SCANA, CP&L, 
Duke) have initially filed non-compliant RTOs.  Grid South does nothing to 
advance a market, much less provide transmission service in a 
non-discriminatory fashion.  In fact, Grid South simply takes the current 888 
OATT and "combines" the three utilities for wheeling through purposes.  

4. PJM CONTINUES TO BE FERC'S SHINING LIGHT.

PJM was the only functioning ISO that filed with FERC earlier than was 
necessary (rumor has it that FERC invited PJM to file early to set the "right 
example").  PJM declares itself to be fully in compliance with Order 2000 in 
that filing.  PJM is also expanding.  So far, Allegheny Power and DQE have 
agreed in principle to allow PJM to operate a parallel control area called 
PJM West.  In terms of market coordination, PJM has been publicly reluctant 
to get involved in working to try to integrate the tight Eastern pools (PJM, 
NYISO,  NE-ISO, and Ontario IMO).   The other pools are not getting very much 
accomplished in their efforts.  For example, NE-ISO has indicated that it 
won't have the Day-Ahead market ready until 2003 at the earliest.  

5. ERCOT LOOKS LIKE IT WILL START ITS WHOLESALE MARKET ON TIME.

ERCOT is pressured to initiate its wholesale market by the needs of retail 
access (pilot program beginning next summer).  The rules are still being 
structured.  We are working to ensure that the tight deadlines don't 
overwhelm good market structure.   Robin Kittel and Ron McNamara are leading 
our efforts and are very active.  

6. SURPRISINGLY FLORIDA IS MOVING ALONG

In a surprise move, the actions so far in Grid Florida, while certainly not 
perfect, appear to be moving in the right direction.  The FL PSC has gone 
from saying never to asking FERC for assistance in getting the rules right.  
Governor Bush has set up a task force to study wholesale competition during 
this Legislative session; Enron will be involved.

B. 2001 Steps - 

1. FOCUS THE POLITICOS ON RTOs AND ENDING THE NATIVE LOAD EXCEPTION.

FERC will have new leadership some time in early 2000 (if we can get a 
President).  Enron is developing a coordinated political plan (Capitol Hill, 
media, Administration, industry allies) to impress upon the next 
Administration and FERC Chairperson that mandates are necessary to continue 
to drive wholesale market reforms.  Without a stronger mandate, it may prove 
difficult to have functioning RTOs by the end of 2001.  More importantly, it 
will take specific policy changes at FERC or within the state during retail 
wheeling proceedings to win the Native Load exception fight.  In those RTOs 
that have determined not to agree to ending the Native Load exception, no 
amount of meetings or filings will change the parties.

2. COORDINATE GOVERNMENT AFFAIRS SUPPORT MORE CLOSELY WITH THE DESK.

It is our intention to have a full time person working from the Desk to 
ensure that Enron's objectives are clearly presented to the developing RTOs.  
The goal is to work alongside Christi Nicolay and the commercial teams to 
coordinate day-to-day activities of our RTO staff and make sure that no 
opportunity is missed.  This should ensure that Enron is advocating the needs 
of the commercial teams.   We continue to have at least one person dedicated 
to each RTO market.

NYISO   -  Howard Fromer
NE-ISO  -  Dan Allegretti
IMO   - Aleck Dadson
PJM  - Tom Hoatson
MISO/Alliance - Jeff Brown / Dave Mangskau
Grid South - Tom Chapman / Joe Connor
Southern  - Joe Connor
Florida  - Dan Staines
SPP  - Ron McNamara
ERCOT  - Robin Kittel

Mike Roan from New Zealand will be arriving in early January to help out.  
Luiz Maurer is coming from Brazil in June / July to also work on wholesale 
market issues.

3. PUSH INTEGRATION OF THE TIGHT NORTHEAST POOLS.

NE-ISO and NYISO are required to file their plans for RTO status on January 
15, 2001.  While these pools have signed an MOU to discuss integration 
matters, not much progress has been made to date.  Moving power between the 
pools continues to be difficult given the different protocols and scheduling 
rules.  FERC is aware of these problems.  Again, FERC has not done anything 
to mandate compliance with Order 2000.  We have deployed an additional 
resource in Houston recently to help support Enron's involvement in the tight 
pool seams issues and make sure that the Desk is being made aware of all 
developments as close to real-time as possible.

4. CONTINUE TO FIGHT IN THE TRENCHES.

The list of people above continue to have day to day responsibility for 
ensuring full coverage of all relevant meetings of each RTO.  We continue to 
advocate our agenda (to anyone that will listen).   This work is time 
consuming (much spent listening to "junk" from monopolist Transmission 
Owners) and detailed.  Enron made solid filings in response to the RTOs 
initial work and will continue to respond in a manner that best leverages our 
resources.

5. FIND THE GRID OPERATOR FOR PROJECT e-trans.

Project e-trans has resulted in a new business consortium - 
etransconsortium.com.  This combination of APX, Cal PX, and Alstom ESCA has 
developed the necessary pieces of software and systems to provide the "market 
front-end" for any RTO (e.g., day-ahead market, transmission exchange, 
etc.).  Enron has also finished drafting a detailed tariff that incorporates 
our policy objectives.  We are now turning our attention to finding the right 
Grid Operator.  We are in discussions with National Grid, American 
Transmission Company, MISO, and PJM (although they may want to do something 
very similar).  The goal remains the same -- to have a fully functioning 
entity that can provide turnkey solutions to any Transmission Owner and use 
this entity to leverage FERC to take more dramatic action.  I will be taking 
a larger role in this activity as it moves forward in 2001.

6. DON'T FORGET ABOUT THE NEED FOR MORE RETAIL ACCESS AND GENERATION 
DIVESTITURE

Government Affairs also will continue to attempt to drive additional markets 
through direct access and divestiture.  It will take (1) non-discriminatory 
transmission access, (2) retail choice, and (3) generation divestiture to 
enable a fully thriving wholesale market.  Of course, additional market 
openings face the political questions raised due to the crisis in California.

I hope this helps put some framework around our activities.  If anyone wants 
to discuss this in more detail, I'd be happy to meet individually or as a 
group.

Jim