The "trade" with the parents and associated companies is really an allocation of premium as opposed to a purchase from the parent.  There was a separate insurance program purchased to cover all the Azurix assets and the premium was allocated to the participants.  Wessex received a portion of the premium through the allocation.  Due to our extensive regulated pipeline system, we are familiar with the issues related to the regulatory scrutiny of allocated premiums.  The pipelines include allocated premiums in their "rate case" and historically, we have been successful in supporting the amounts charged.

On what are you basing your statement that the Azurix allocation to Wessex is not competitive?  Have you priced coverage in the market?  I would be very interested in the information that you have received as our only data points would be your premium levels when we acquired Wessex.  As you will recall,  Enron left your program in place initially.  Azurix placed their own program in December of 1999, and your program was terminated at that time. (This is only the second year of the Azurix program.)  The market has "hardened" considerably over the past two years.

Once the North America assets are sold, the "Azurix" program will be remarketed (Dec., 2001) for the four (4) remaining water companies and a small U.S. exposure, if any remains.  This would be a portfolio of assets with similar operations and I would not anticipate  Wessex supporting the rest of the Azurix program.  We could also consider providing coverage under the Enron program, if it fits. 

If you have not gone to the market, how would you propose doing so in order to secure stand alone pricing?  What brokers and markets would you plan to use?  Do you plan to return to using a captive for certain coverages? 

Please advise. 

 -----Original Message-----
From: 	Mark Watts <mark.watts@wessexwater.co.uk>@ENRON [mailto:IMCEANOTES-Mark+20Watts+20+3Cmark+2Ewatts+40wessexwater+2Eco+2Euk+3E+40ENRON@ENRON.com] 
Sent:	Thursday, September 06, 2001 4:00 AM
To:	Bouillion, James L.
Subject:	Wessex Insurance's

Jim,

Thanks for your e-mail of 8 August informing us that a decision had been
made to keep Wessex insurance's under the existing Azurix global programme,
or to ultimately absorb the whole of Azurix into an Enron programme.  Whilst
we understand this, we are concerned that a continuation of the global
policies, at the current cost to Wessex, will raise some regulatory problems
for us in the UK.

Our Licence requires us to report trades with parents and associated
companies, and to demonstrate that any such trades are undertaken at arms
length.  Moreover we are required to periodically test such arrangements.
Clearly this has not been done in respect of Insurance.

Even more worrying is the fact that the cost of the Global insurance
programme to Wessex is simply not competitive.  The current level of
premiums we pay, when added to the much higher excess levels we incur, are
in excess of what we could arrange on a standalone basis.  Going forward, if
Wessex is to support the rest of the Azurix programme, our costs can only
but rise.

In light of these problems we either have to reduce the cost of the Global
policies to Wessex or allow Wessex to obtain standalone cover.

Regards.

Mark Watts

Treasurer


**********************************************************************
This email and any files transmitted with it are confidential and
intended solely for the use of the individual or entity to whom they
are addressed. If you have received this email in error please notify
the Wessex Water IT Support Centre on:

44-1225-528888 or email support@wessexwater.co.uk

This footnote also confirms that this email message has been swept by
MIMEsweeper for the presence of computer viruses.

www.mimesweeper.com
**********************************************************************