We are in the final negotiations with four introducing brokers to allow access and execute capability on EnronOnline (broker client). The broker client allows the broker to do the same thing they do today via the phone on the computer.  Enron currently assume the risk of executing through brokers over the telephone with no security.

Due to the potential for a magnification of broker risk online, in addition to managing the credit risk with the counterparty we are requesting security from the brokers executing via EnronOnline.  The amount of security we are requesting is a percentage of the intraday risk associated with broker executed transactions and will not cover the entire intraday exposure.  In the past, losses resulting from brokers have been small. 

Credit has requested that we discuss this with you to ensure that you are aware of the risk of dealing through brokers and understand that losses resulting from broker errors are not considered credit losses.

I will call you tomorrow to answer any questions you may have relative to this.

Bob Shults
713 853-0397
713 825-6372 c
bob.shults@enron.com