Jeff,

Good to see you in New York last week at the Guggenheim -- I enjoyed your 
company at the dinner.  Lisa Yoho passed on your questions about the Bush 
Energy Plan and opportunities for EGM, so I thought I'd outline a few from 
Lisa Jacobson's and my perspective.  Many of the recommendations in the 
Energy Plan are very broad and could take months (if not years) to approve.  
However, there are certainly a few areas where EGM could find more immediate 
opportunity, or where we could weigh in to make the longer-term components of 
the plan beneficial to Enron.
 
Short-term opportunities

$2 billion over ten years for Clean Coal Technologies:  There may be 
opportunities to pursue R&D funding, pilot projects, or tax incentives for 
technologies such as NOx Tech.  While the bulk of this money could take 
several years to approve, there is "clean coal" program money available now 
for FY 2002, and DOE is already structuring programs for 2003 money.   I have 
already discussed this briefly with the Clean Energy Solutions folks, but we 
have good contacts at DOE and they are very anxious to work with Enron, as 
they see us as a company who can help make the most of their R&D money 
because we are serious about moving technologies to market.   

Climate Change R&D:  Any financial support the government puts toward climate 
change R&D could likely also be utilized for new generation/control 
technologies, but this would be a longer-term opportunity.

New Source Review (NSR) Reforms -  NSR has been an obstacle to constructing 
new generation, but also a huge thorn in the side of big coal-using utilities 
who would like to make modifications to keep grandfathered plants alive as 
long as possible.  The Clinton/Browner EPA brought major enforcement lawsuits 
against a number (Southern, TVA, AEP, Cinergy) and a few have settled 
(Cinergy, TECO). The Bush Energy Plan asks the EPA and Justice Dept. to look 
at 1) possible changes to the NSR enforcement lawsuits and 2) longer term 
changes to NSR regulation -- all in the name of bringing more energy supply 
on line.  The utilities are mounting very aggressive lobbying efforts to 
change NSR.

A DOJ decision on the enforcement could be forthcoming in the short term 
(summer 2001).  In the big picture for Enron, letting the big, coal-using 
utilities off the hook would not be the best outcome -- enforcement relief 
only holds benefits for the incumbents and not new entrants in the power 
development market.   But if it happens, we'll make sure the EGM folks have 
good advance warning so that they can take advantage of any coal trading or 
technology plays that they might find as a result from these utilities moving 
forward with plant modifications or capacity increases.

Any NSR regulatory changes will be fought over the longer-term (with 
resistance from environmentalists), and could also likely be addressed in the 
multipollutant debate -- see below.

Long Term Opportunities/Advocacy

Multipollutant legislation -  A regulatory program that all at once 
streamlines regulation of NOx, SO2 and mercury as well as provides relief 
from NSR requirements could be extremely beneficial for EGM's emissions 
trading and technology businesses (as well as a number of other Enron 
businesses).   Nationwide trading for these pollutants would open up markets 
and create liquidity far beyond the current programs.   Regulatory certainly 
for generators seeking to upgrade, expand and improve efficiency at power 
plants could provide incentives for technology and risk management services.

Our Environmental Strategies group has developed a multipollutant plan that 
achieves a number of goals for Enron, including nationwide cap-and-trade for 
3 (or even 4, if CO2 is included) pollutants in a way that provides 
incentives for new technologies, promotes fuel diversity, and has economic 
safeguards in place.   We've structured it to have multiple benefits to 
Enron, and we are working on getting key Administration and congressional 
officials to adopt our ideas.   We're making progress, but expect this debate 
to go on for at least a few years.

Here are some excerpts from recent slides summarizing our plan, if you're 
interested.



Please let us know if you have any questions - we are happy to work with you 
and anyone in EGM to take advantage of opportunities in these environmental 
proposals.

Regards,

Jeff Keeler
Director, Environmental Strategies
Enron
(202) 466-9157
Cell Phone (203) 464-1541

Lisa Jacobson
Manager, Environmental Strategies
Enron
(202) 466-9176