Senators Dunn and Bower and their staffs met with representatives of
Mirant, Wiiliams, Duke, Reliant, and Dynegy- and me- for over two hours at
the State Capital yesterday. I will report fully on the meeting by telephone
tomorrow morning, however, this report summarizes the principal issues
covered in the session.
 Dunn spent about a half hour describing the scope of his
sub-committee's investigation. He styled it as an investigation into whether
anti-competitive behavior has occurred or is occurring in the California
wholesale market. If they find that it has, they will recommend curative
legislation. If they find the behavior was criminal they will refer evidence
to the AG. Dun vowed that he would not allow parties adverse to the
generators to participate in this investigation. At the same time he is
inviting other county and state lawyers to help him- the first volunteer is
the San Joaquin District Attorney. He said there was no predetermined
conclusion and he would allow the generators to explain the "suspicious"
facts. He said the investigation would be fair and that if there was a leak
of information we should "let him know". He had two initial requests- first,
he wants immediate production of Enron's document retention (he actually
called it document destruction) policy. We are to let him know by Wednesday
if we will produce the current version. Second, he wants the parties to
stipulate to an order pledging that each will not destroy documents. He says
he will go to court to get such an order if we refuse.
 The rest of the meeting was spent negotiating a confidentiality
order. The generators had earlier sent sub-committee special counsel, Larry
Drivan,  a discussion draft of such an order. Dunn and Drivan discussed it
point by point. At the onset Drivan acknowledged Enron had not seen the
draft and said nothing said at the meeting would bind Enron to any position
about it. The generators and Dunn seemed to agree on many of the principal
points- e.g. they would in fact consent to such an order; the subcommittee
could contest claims of confidentiality; the subcommittee could require the
logging of privileged documents and the assertion of privilege could be
challenged in court; they would all initiate a procedure for a court to sign
such an order and preside over discovery disputes. Surprisingly, most
generators did not object when Dunn suggested Sacramento Superior Court as
the proper venue-although there was no final agreement on this. The dispute
between the committee and the generators was primarily over who could view
"confidential" documents. The generators wanted NDA's signed by all staff,
as well as all consultants and experts. Dunn refused.
 Last week the subcommittee subpoenaed the ISO for documents that
pertain to ISO conclusions of market manipulation. The ISO has refused to
allow the generators or Enron see the documents they will produce. The
generators have discussed seeking a protective order- venue uncertain- but
Dunn (and most of the generators) seemed to believe the stipulated
confidentiality order under discussion would solve the problem of ISO
production. Duke asked Dunn to delay the production date for ISO for a few
days until they can work out the terms of the confidentiality order. Duke
(per Kleinman) is in charge of drafting the order. Kleinman said he would
get a draft to Dunn early next week. Dunn said he had no objection if the
generators got documents from ISO. He asked that the generators call ISO
directly and see if ISO would give the documents to them. Several generators
said they would do that.

 The meeting was maintained at a very professional level. Dunn's
approach was one of a class action lawyer in a roomful of big corporate
defendants- urging everyone to get along because as "professionals" everyone
knew how the game gets played. However, he is seriously understaffed. He has
few resources for litigation- nor has he resources to review the millions of
documents he has requested. He must be relying on either outside experts- or
outside allies- to do that. Given that, it is hard to see how a
confidentiality order could be enforced against him, regardless of what he
staff discloses. Further,` if he uses outside experts to do who are not
bound by the order they will likely go to work against us later with the
information. The generators already have made considerable productions to
the AG and they may be less troubled by this. They certainly seemed willing
to play ball at the meeting- although privately they may have other plans
which they did not air with Dunn. We should talk to them about that.

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