I spoke with Scott Miller yesterday about several issues, so of course 
California came up.  Scott expressed frustration with the California 
situation and indicated that he thinks California will never be able to move 
away from its current problems without a comprehensive solution, led by an 
entity like the Administration.  Scott said he thinks all the parties need to 
come to the table and reach some sort of agreement to net out the differences 
between what suppliers are owed and what California thinks it is owed in 
refunds.  Once that is accomplished, the parties would then agree to enter 
into 1-3 year supply contracts at agreed-upon prices for the bulk of 
California's power needs.

Scott has been floating this idea with his colleagues (unnamed) who countered 
with "Would Ken Lay agree to something like that?"  I told him that I agree 
there needs to be a comprehensive solution to California but I did not know 
what Enron would agree to.  I asked him if he has heard anything about the 
Vice President's task force and whether the report will propose something 
like this.  Scott indicated that he and his group have had no contact with 
the task force and he has no information as to what will be in the report.  
This workout plan is just Scott's idea for now.

Scott said he thinks the current scenario is unworkable, that there is not a 
lot of internal support for Hebert's approach, and that things will get 
worse.  For example, Scott said that although generators are the only 
suppliers subject to cost justification at present, if the problems continue, 
marketers will be subject to the same cost justification in the future.

I thought you all would be interested in this conversation.  I told Scott 
that since Joe has changed jobs, that he should feel free to call me with 
questions or to talk about things like this, and he also told me to call him 
whenever we need him.  Although Scott is not expecting a response from us on 
his California idea, if we do have some sort of response, we may want to 
convey it to him just to show our interest in working  with him and his group 
and that we have a similar interest in resolving the problems in California.