I hope that the following clears up some of the  confusion regarding the 
above-captioned process.

Factor loadings are an input to Value-at-Risk (VAR).  Generally, you can 
consider them the determinants of relationships between curves,and points on 
curves based on trader inputs.   These pertain to all curves not just North 
American Natural Gas.  There is a specific program which calculates these 
relationships which requires a considerable amount of processing time (3 
hours per run) as well as another few man-days to evaluate the results.  

There is no "ideal" or recommended period in which these must be updated.  
More frequent is "better".  Given the amount of time it takes to refresh, it 
was "agreed" a long time ago amongst  RAC, Research, IT and Operations that 
it would be done every 2 weeks.  No commercial input was received.  The roles 
were to be simple as they are with most roles in and around VAR and other 
risk management controls: 

 Research specifies the math
 IT codes the program
 Operations runs the program
 RAC evaluates the results 

The process has been run every two weeks on the second Thursday of every 
month since February (as it had been prior) and RAC has rejected the results 
because the results did not reflect the underlying math because of the 
complexity of the math and the continuing addition of new products and 
curves.  This  created the need to recode the application from scratch.   RAC 
continued to agitate to get this done, particularly knowing that the pressure 
on the efficacy of VAR would be questioned as we went into the volatile 
period of 2000 ( e-mails from Rudi Zipter available upon request).  The new 
code was implemented last Thursday and the results were accepted resulting in 
an approximate 10% difference in VAR.

RAC had requested that the code be re-written on 6/10/99 @ 7:44 am with a 
target completion date of  8/2/99.  This was discussed and accepted by 
Phillipe Bibi on 6/17/99 in a meeting in his conference room with Rick Buy, 
Dan Bruce, Jonathon Le, Ted Murphy, Bill Bradford, Debbie Brackett and Rudi 
Zipter along with the rest of our task list.  

We have resolved that the process will continue as stated and will 
communicate to you the results. 

There are dozens of other processes that are important to the calculation and 
interpretation of VAR that need to be implemented, enhanced, improved or 
rewritten altogether.  For example, the jump-diffusion factors for North 
American Power have not been refreshed in 2000.  The prioirty is dependent on 
the level of precision required. 

I will provide a comprehensive list of those processes in due course.

Ted