Realistically, only the trading support provided for straight-forward gas and power trading makes sense to consider in a cost per transaction mode.  I would say that the only part of IT Development costs that could be considered in that would be the system maintenance costs and maybe the licensing fees.  Capital projects don't make sense on a cost per transaction basis - should be looked at as individual discreet costs that the business unit sponsor and ENW agree upon.  

While we could come up with a methodology for cost per transaction, I still have concerns about this on a lot of levels.  Frankly, the relationship between the book administrators and traders is just as collaborative as the EOL relationship.  If we are boxed into a cost per transaction, then whenever John Lavorato or the traders ask for a different view of data or an ad hoc analysis of P&L, we would need to discuss this as a change order and price accordingly.  Practically speaking, there is not one of the ad hoc trader requests that isn't needed yesterday, and stopping to negotiate whether the request is in or out of scope and additional pricing would probably get me and my risk team fired!  I also have a big concern over pushing the envelope on an arms length service arrangement.  I will have trouble recruiting and retaining the best people.  The guys on my operations team honestly work every day with the business goals of EA in mind.   They work hard to insure success for EA.  That is what John and Louise should want.  Push us back too far and no one will like the results if we don't have people fully dedicated to and feeling a part of the business to which they provide support.  It is kind of ironic.  I think that Enron is pleased with how I've managed operations, and one of my goals when I took the role a few years back was to create a true team between commerical and my operations team to make sure that this works for Enron.  I have some really good people who are very motivated, and a big part of that is my commitment to have operations viewed as an integral part of the team at EA, EGM, EIM, etc.  We had to work hard to achieve that, but we've gotten there for the most part.  So how odd it is to me that now some people want to undo what has been a major contributor to the success that we have had.  EES is reeling right now partly because they have never recognized the value of creating a good operations team, nor did they approach operations as an integral part of managing their business in full.  And now I have been asked to help correct that.  Makes you kind of wonder... 

I am fully supportive of running operations (and ENW) like a business, with a critical eye toward delivering value effectively.  When I first took this role I told my team that at that time we were the service provider of circumstance and that the goal was to move to a feeling that we were the service provider of choice.  A component of this is definitely striving for lower costs and higher value delivered.  We can continue to improve on this, but going too far may produce the wrong answer for Enron.  --Sally 

 -----Original Message-----
From: 	Piper, Greg  
Sent:	Wednesday, September  26, 2001 2:36 PM
To:	Beck, Sally; Pickering, Mark
Subject:	RE: Regrouping of ENW Budget Discussions - Per transaction thoughts 

I have been thinking alot about this per transaction thing.  

ENW provides three very different types of services to Enron.  The first, EnronOnline, is very collaborative and is very much an application building and operating situation.  No one at Enron is looking to outsource EOL functionality.  Creativity in that application is driven by the desks and ENW in a marriage every hour of every day.   If it goes down for a minute, traders are panicked and the news wires start pumping out that it is down.  I am not in favor of any relationship on EOL that would drive any kind of arms length wedge between us and any other group.  If my revenue is not large enough on EOL, do I let service slip?  What is a new function and feature request that fits in the contract?  Do I do change orders?  What is an EOL change order?  I think EOL is an allocation relationship.

IT infrastructure is something that could be outsourced.  It was once and it didn't work very well and we pulled it back in.  If we outsourced it, how would EDS or IBM or someone like that price that service to us?  By a per transaction charge?  Not likely.  On this one, we can charge exactly like it was outsourced to them by charging per desk top, putting depreciation in a $/month charge, having them select their level of service on controllable, etc.  That would be up to Mark and Jenny.

So let's get down to what really is a service related to transactions and that is fulfillment and the operations and IT associated with that.  Let's say we went per transaction on that in some fixed and variable form.  Once again, the pain will come around negotiating levels of service and eliminating the flexibility for them to change quickly.   We will also have issues since we have shared systems and EIM and EGM may not want to pay per transaction.

I am against per transaction for EOL, I am OK pricing something like any other service company would price on IT infrastructure, but I think we should only consider per transaction on the fulfillment portion.

Your thoughts?

GP

 -----Original Message-----
From: 	Beck, Sally  
Sent:	Wednesday, September 26, 2001 10:19 AM
To:	Kitchen, Louise
Cc:	Piper, Greg; Pickering, Mark; Colwell, Wes
Subject:	RE: Regrouping of ENW Budget Discussions 

Wes and team had preset the meeting schedule and topics to be covered in each.  The outline that I sent you with the changes for the remainder of this week is simply our best attempt at fitting coordinating topics around people availability and the meeting schedule that had already been set.  The schedule that we have been working with that Wes provided did not allocate two hours for the Friday meeting.  If you had set aside two hours, that had not been communicated to us.  There were only two one-hour meeting slots on that schedule.  One for ENW from 1-2 and one for Research from 3-4.  I have a major conflict on Friday - I committed months ago to attend a meeting that Ken Lay asked to be involved in that is in the Woodlands that runs through the evening hours..  Only because Beth Perlman is out on Thursday for a religious holiday, I decided to "skip out" from this meeting to be here on Friday afternoon to discuss the Operations and IT Development budgets together.  In order to minimize my time away from the Woodlands meeting, I orchestrated the time swap with Vince Kaminiski so that we could have our ENW meeting at 3:00.  I will talk with you later today and fill you in on the commitment for Ken Lay.  Maybe we can work together for a scheduling solution that works for both of us.  I would appreciate your help on that, Louise. 

Scheduling issues aside, Wes suggested that we also review with you the EES budget that ENW has prepared.  Our approach so far has been to determine the appropriate and necessary spend for 2002 for expense and capital for all of the services that ENW provides to support the EES business.  We have done this without regard to who will cover which expenses - EES or EA.  That is a separate issue from understanding the services that need to be provided and our best estimate at costs.  We are prepared, however, with a suggested split on the costs for discussion purposes.  I have assumed that the decision on cost sharing or allocation would be made between the offices of the chair for EES and ENW.  If you would like to cover all of ENW's budgets together, both for EES and EA, then it would make more sense to set a longer block of time (maybe 3 hours?).  I will bring my schedule to our meeting at 11:00 today to cover the Canadian budget and we can work out a schedule that works for both of us.  

We will be prepared to discuss pricing per transaction, but will hold that until the end of our meetings when we have been able to review with you the components of costs and the detail of capital projects.  Our review of costs and projects in effect will serve as our "scope of engagement" discussion.  A service provider would never quote a firm price until agreement had been reached on the scope of the engagement.  We will have a straw man for discussion on that.    --Sally 

 -----Original Message-----
From: 	Kitchen, Louise  
Sent:	Wednesday, September  26, 2001 8:23 AM
To:	Beck, Sally
Cc:	Piper, Greg; Pickering, Mark; Colwell, Wes; Killen, Faith; Roper, Kerry; Schoppe, Tammie; Valdez, Christina
Subject:	RE: Regrouping of ENW Budget Discussions 

I am expecting an all in cost for this service - what do we achieve in separation.  I had allocated two hours on Friday to do this from 1pm until 3pm.   Are you not intending an all in cost (per transaction) of IT and Operations?  If you believe that the outline below works then go ahead, do we just have the total number debate on Fridy - if so let's start at 2pm.

Thanks

Louise

 -----Original Message-----
From: 	Beck, Sally  
Sent:	Tuesday, September 25, 2001 7:36 PM
To:	Kitchen, Louise
Cc:	Piper, Greg; Pickering, Mark; Colwell, Wes; Killen, Faith; Roper, Kerry; Schoppe, Tammie; Valdez, Christina
Subject:	Regrouping of ENW Budget Discussions 

Louise,

To make our ENW budget discussions most meaningful, we felt that coupling discussions of the Operations and IT Development budgets will make the most sense.  To insure that we have the appropriate attendees in our  ENW 2002 plan meetings and to schedule these meetings around Thursday as a religious holiday, I have worked with Wes Colwell and made a trade with Vince Kaminski to make all of this happen.  There is no change to your calendar in terms of date, time or location of meetings.  We have simply realigned topics and attendees as follows: 

Date			Time		Location	Revised Group			Revised Attendees 

Wed, 9/26		11 - Noon	EB3314		Canada Support (unchanged)	Wes Colwell, Faith Killen, Louise
											Kitchen, Sally Beck, Rob Milnthrop,
											Bob Hall (added-responsible for EA
											Operations, including Calgary)
	
Thurs, 9/27		1:30 -2:30	EB3316		ENW: EOL & Infrastructure	Wes Colwell.Faith Killen,Louise
											Kitchen, Sally Beck,Mark Pickering,
											Jenny Rub, Greg Piper, Kerry Roper,											Brad Richter (added-EOL), Jay 												Webb (added-EOL)

Fri, 9/28		1 - 2pm		EB3316		Research			Wes Colwell, Faith Killen, Louise
											Kitchen,Vince Kaminiski (no 												changes)

			3 - 4pm		EB3314		ENW: Operations & IT Dev.	Wes Colwell,Faith Killen, Louise 
											Kitchen,Sally Beck, Beth Perlman,
											Mark Pickering, Greg Piper, Kerry
											Roper, Bob Hall (added-EA 												Operations) 

I look forward to reviewing details with you in each of these meetings.  --Sally