Tim,
The short answer to your question is:  "sort of."  Let me explain. 

 The perfect tax clause would say:  if there is ever a tax, you (meaning the 
other guy) will always pay it and we will pay nothing.  Obviously a contract 
containing  this kind of clause will not be signed by anyone. 

 So, a further, compromise type step is to say:  ok, if there is ever a 
future tax, and it is materially painful, and we can't work out a way of 
dealing with it among ourselves,  then we will terminate the contract and 
split the termination payment for mark to market exposure 50-50. A clause 
containing this kind of language has been used in the past, but it is not 
part of the EEI or WSPP, for example, and one cannot say it is widely in 
effect in our agreements. 

What the standard power contracts end up doing is compromising. They dodge 
the issue and I am not sure that a perfect bilateral contract could do any 
better.    They basically say that if there is ever a tax, either existing or 
future,  the Seller will pay it if it falls on the transaction before the 
Delivery Point,  and the Buyer will pay it if it falls on the transaction at 
and after the Delivery Point.  The poor innocent Delivery Point is forced to 
be the arbitrary fulcrum upon which tax allocation must precariously teeter.  

What the standard language forces us to do is anxiously hope that in every 
transaction we ever do that we will be on the side of the Delivery Point that 
will save us from the tax.  The other guy is in exactly the same boat.  

When a price cap is actually  imposed, whether it be called a price cap by 
the FERC or called windfall profits tax by California, there are two 
fundamental legal questions:  1.  Should we keep doing business at all?  2. 
Do our contracts protect us from the tax in respect of our existing 
business?  The Legal group (Elizabeth, Steve and me, keeping contact with 
Mark Haedicke) are working through an  analysis of this situation and are 
trying to get the Tax Department's  input which is very important and which 
we must ultimately be guided by.  My suggestion to you at this point is that 
we should not just plunge ahead doing long term deals in California, but 
should pause and make sure we have thought this thing out very carefully.  We 
will try to help as much with this big issue as soon as we can.  ----cgy  

 -----Original Message-----
From:  Belden, Tim  
Sent: Thursday, May 10, 2001 7:07 AM
To: Christian Yoder/HOU/ECT@ECT
Subject: FW: City of Palo Alto - credit reserve

do our contracts have any standard language referring to the allocation of 
future tax burdens.  specifically, if california implemented a gross receipts 
tax whereby any revenue that we receive in excess of $60.00/MWh would be 
subject to a 50 percent tax.

 -----Original Message-----
From:  Ngo, Tracy  
Sent: Wednesday, May 09, 2001 10:02 AM
To: Hardy, Trey; Chang, Fang; Law, Samantha; Dunton, Heather
Cc: Rosman, Stewart; Badeer, Robert; Belden, Tim; Buy, Rick; Bradford, 
William S.; Rohauer, Tanya; Sacks, Edward; Conwell, Wendy; Radous, Paul
Subject: City of Palo Alto - credit reserve

Please note the following addition to the domestic credit reserve for May 
2001:

CP:  City of Palo Alto
Enron Entity:  EPMI
Deal #:  605356.1
Deal Specifics:  EPMI Sale
Term:  6/1/2001 thru 1/31/2005
Delivery Point:  NP-15 (Firm CAISO Energy)
Volume:  25MW, 7X24; 804,600 nominal MWh)
Price:  $95.00
Trader/Mid-Marketer:  Bob Badeer/Stewart Rosman
Credit Reserve Amount:  $185,000 (one hundred eighty-five thousand USD)

RAC:  Deal confirmed under new EEI Master Power Purchase and Sale Agreement 
w/margin rights.

Please let me know if you have any questions to the above.

Regards,
Tracy Ngo
503-464-8755