I think there is still the possibility that, just like has happened to El Paso, that Enforcement could still open the case since FERC is still out trying to find a way to get us.   It is true that the ALJ did not help them out, but that decision is not binding upon the commission.    Neither Stan, Drew or I are comfortable yet that we have the win.  We are pleased with the ALJ decision, but know that the ALJ did not get to the answer the Commission intended.

-----Original Message-----
From: Saunders, James 
Sent: Sunday, November 04, 2001 6:06 PM
To: 	
Cc: Hayslett, Rod; Chandler, Bob
Subject: RE: Initial Decision of ALJ in TW Negotiated Rates Proceeding


i think mgmt will rep that it is still operating under a show cause order, and the ultimate outcome has yet to be determined


-----Original Message-----
From: heather.l.mueck@us.andersen.com
[mailto:heather.l.mueck@us.andersen.com]
Sent: Sunday, November 04, 2001 5:53 PM
To: Chandler, Bob
Cc: Saunders, James; Fancler, Dan; Zahn, Gary; Porter, Gregory J.
Subject: RE: Initial Decision of ALJ in TW Negotiated Rates Proceeding



Unlike your regulatory liabilities in the past - "subject to refund" - in
which there is an order from the FERC stating you can increase rates but
you need to reserve for them because they are subject to refund until the
final order comes out, this is a GAAP contingency and must meet the
definition of "probable" liability.  Does mangement really believe that it
is probable they will not be able to recover the $10 million?  Especially
given the 10/24/01 initial decision, do you really believe it is not
recoverable given the fact you've publicly stated that you are entitled to
it, the paying parties have stated you are entitled to it and now the ALJ
has stated that you are entitled to it?

Will management represent to us that it is probable TW will not be able to
recover in the general rep?


To:   Heather L. Mueck@ANDERSEN WO, James.Saunders@enron.com
cc:   Dan.Fancler@enron.com, Gary.Zahn@enron.com, Greg.Porter@enron.com
Date: 11/04/2001 05:27 PM
From: Bob.Chandler@enron.com
Subject:  RE: Initial Decision of ALJ in TW Negotiated Rates Proceeding


I'm not sure this qualifies as a subsequent event because it isn't
conclusive enough to trigger a reserve reversal. I think we should disclose
it in the interests of full disclosure, but certainly doesn't require a
change in financials.

      -----Original Message-----
     From:   heather.l.mueck@us.andersen.com@ENRON
     Sent:   Sunday, November 04, 2001 5:14 PM
     To:     Saunders, James
     Cc:     Chandler, Bob; Fancler, Dan; Zahn, Gary; Porter, Gregory J.
     Subject:  RE: Initial Decision of ALJ in TW Negotiated Rates
             Proceeding


     I very much agree with the below and the reason for establishing the
     reserve, however, given the positive order from the ALJ is this a type
     I or
     type II subsequent event (one requires adjustment to the financial
     statements and one that does not).  I realize the FERC still needs to
     approve, however I think that the "heat" as described below has cooled
     down
     and a recommendation from the ALJ to the FERC would be viewed as a
     positive
     thing causing the need to reverse the reserve.  (see below literature
     from
     SAS 12).



     .02 Two types of subsequent events require consideration by management
     and
     evaluation by the independent auditor.

     .03 The first type consists of those events that provide additional
     evidence with respect to conditions that existed at the date of the
     balance
     sheet and affect the estimates inherent in the process of preparing
     financial statements. All information that becomes available prior to
     the
     issuance of the financial statements should be used by management in
     its
     evaluation of the conditions on which the estimates were based. The
     financial statements should be adjusted for any changes in estimates
     resulting from the use of such evidence.

     .04 Identifying events that require adjustment of the financial
     statements
     under the criteria stated above calls for the exercise of judgment and
     knowledge of the facts and circumstances. For example, a loss on an
     uncollectible trade account receivable as a result of a customer's
     deteriorating financial condition leading to bankruptcy subsequent to
     the
     balance-sheet date would be indicative of conditions existing at the
     balance-sheet date, thereby calling for adjustment of the financial
     statements before their issuance. On the other hand, a similar loss
     resulting from a customer's major casualty such as a fire or flood
     subsequent to the balance-sheet date would not be indicative of
     conditions
     existing at the balance-sheet date and adjustment of the financial
     statements would not be appropriate. The settlement of litigation for
     an
     amount different from the liability recorded in the accounts would
     require
     adjustment of the financial statements if the events, such as personal
     injury or patent infringement, that gave rise to the litigation had
     taken
     place prior to the balance-sheet date.

     .05 The second type consists of those events that provide evidence
     with
     respect to conditions that did not exist at the date of the balance
     sheet
     being reported on but arose subsequent to that date. These events
     should
     not result in adjustment of the financial statements.(superscript: 1)
     Some
     of these events, however, may be of such a nature that disclosure of
     them
     is required to keep the financial statements from being misleading.
     Occasionally such an event may be so significant that disclosure can
     best
     be made by supplementing the historical financial statements with pro
     forma
     financial data giving effect to the event as if it had occurred on the
     date
     of the balance sheet. It may be desirable to present pro forma
     statements,
     usually a balance sheet only, in columnar form on the face of the
     historical statements.

          (superscript: 1.)This paragraph is not intended to preclude
     giving
          effect in the balance sheet, with appropriate disclosure, to
     stock
          dividends or stock splits or reverse splits consummated after the
          balance-sheet date but before issuance of the financial
     statements.

     .06 Examples of events of the second type that require disclosure to
     the
     financial statements (but should not result in adjustment) are:

        a.      Sale of a bond or capital stock issue.

        b.      Purchase of a business.

        c.      Settlement of litigation when the event giving rise to the
     claim
          took place subsequent to the balance-sheet date.

        d.      Loss of plant or inventories as a result of fire or flood.

        e.      Losses on receivables resulting from conditions (such as a
          customer's major casualty) arising subsequent to the
     balance-sheet
          date.

     .07 Subsequent events affecting the realization of assets such as
     receivables and inventories or the settlement of estimated liabilities
     ordinarily will require adjustment of the financial statements (see
     paragraph .03 (Document link: P/AU560.03/AUPROSTD)) because such
     events
     typically represent the culmination of conditions that existed over a
     relatively long period of time. Subsequent events such as changes in
     the
     quoted market prices of securities ordinarily should not result in
     adjustment of the financial statements (see paragraph .05 (Document
     link:
     P/AU560.05/AUPROSTD)) because such changes typically reflect a
     concurrent
     evaluation of new conditions.


     Comments?




     To:   Heather L. Mueck@ANDERSEN WO, Bob.Chandler@enron.com
     cc:   Dan.Fancler@enron.com, Gary.Zahn@enron.com,
     Greg.Porter@enron.com
     Date: 11/04/2001 03:57 PM
     From: James.Saunders@enron.com
     Subject:  RE: Initial Decision of ALJ in TW Negotiated Rates
     Proceeding


     At the time the reserve (early '01) was eatablished, the CA situation
     was much much much more contentious, and likely recovery of amounts
     negotiated was -at that time- in jeopardy. Over the course of the year
     via much time and effort (legal, regulatory, commercial), and to a
     certain degree -stablization of the CA market, customers, and the FERC
     ALJ have seen their way clear to a reasonable position.


     -----Original Message-----
     From: heather.l.mueck@us.andersen.com
     [mailto:heather.l.mueck@us.andersen.com]
     Sent: Sunday, November 04, 2001 3:45 PM
     To: Chandler, Bob
     Cc: Fancler, Dan; Zahn, Gary; Saunders, James; Porter, Gregory J.
     Subject: Re: Initial Decision of ALJ in TW Negotiated Rates Proceeding



     I got Greg Porter's message too, however this doesn't tell me why the
     reserve was initially established in the first quarter - i.e. a
     probable
     liability.  In fact, this document seems more to weigh against your
     need
     to
     establish a liability.  Did I miss something?


     To:   Heather L. Mueck@ANDERSEN WO
     cc:   Dan.Fancler@enron.com, Gary.Zahn@enron.com,
     James.Saunders@enron.com,
           Greg.Porter@enron.com
     Date: 11/04/2001 03:15 PM
     From: Bob.Chandler@enron.com
     Subject:  Initial Decision of ALJ in TW Negotiated Rates Proceeding


     Click on this hyperlink to open a copy of the document from the FERC
     web
     site:

     http://cips.ferc.fed.us/Q/CIPS/GAS/RP/RP97-288.0AI.TXT


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