----- Forwarded by Richard B Sanders/HOU/ECT on 12/01/2000 10:01 AM -----

	Mary Hain
	12/01/2000 09:49 AM
		
		 To: "Ronald Carroll" <rcarroll@bracepatt.com> @ ENRON
		 cc: <GFergus@brobeck.com>@ENRON, "Jeffrey Watkiss" 
<dwatkiss@bracepatt.com>@ENRON, <acomnes@enron.com>@ENRON, 
<jhartso@enron.com>@ENRON, <jsteffe@enron.com>@ENRON, 
<mary.hain@enron.com>@ENRON, <smara@enron.com>@ENRON, Richard Sanders, 
Christian Yoder/HOU/ECT@ECT, steve.c.hall@enron.com
		 Subject: Re: Latest Draft

Attached is the discussion of our net earnings for question 2.  I also did a 
little tinkering with the last paragraph from the last version I sent.  I 
haven't looked at Ron's proposal yet so if Ron rewrote this paragraph I may 
want to defer to what he said or figure out how to "simonize" (ha ha) the 
two.  Sorry to send this to you so late.  I thought I had sent it yesterday 
but forgot to click the send button on my E-mail.  No wonder no one was 
sending any comments!


   
	Enron Capital & Trade Resources Corp.
	
	From:  "Ronald Carroll" <rcarroll@bracepatt.com>                           
12/01/2000 06:48 AM
	

To: <GFergus@brobeck.com>
cc: "Jeffrey Watkiss" <dwatkiss@bracepatt.com>, <acomnes@enron.com>, 
<jhartso@enron.com>, <jsteffe@enron.com>, <mary.hain@enron.com>, 
<smara@enron.com> 
Subject: Re: Latest Draft


Gary, Thanks for your comments.  They were most helpful.

I agree that I have swung for the fences in that discussion, and I am not 
overly optimistic that FERC will reach out and specifically assert preemption 
(although its assertion of preemption could be implicit in its actions).  I 
thought that the argument that the market would be damaged by ongoing 
litigation might have some appeal at FERC, and it was worth a shot.

Until I read your email, I thererfore saw no downside in asking.  The 
question that I have for you is how strong would an allegation in court be 
that the mere fact that we asked for a preemption finding, as to which FERC 
did not address, constitutes a negative finding that FERC elected not to 
assert preemption.  Not having done the research, my sense was that such a 
result would have no precedential effect, along the lines that a denial a 
cert by the Supreme Court is not precedential.  This is an important point.  
Perhaps we could schedule a call with Mary, et al., to discuss strategy.    
Ron


>>> "Fergus, Gary S." <GFergus@brobeck.com> 12/01/00 12:04AM >>>
Ron,
 Your latest draft has minimized the earlier concerns that I had.
You are definitely swinging for a preemption home run ball in the San Diego
litigation.  In response to Question No. 4, you are asking FERC to
specifically to find that it is preempting investigations of last summers
market, find that the rates charged were just and reasonable and determine
that sellers are immune from refund under any possible legal theory.  There
is some risk if we ask for this finding and do not get it, that fact will
diminish arguments we might have in state or federal court that there has
been preemption.  As a practical matter, however, our preliminary research
has shown that without a very specific intent to preempt anti-trust laws,
for example, the preemption argument may be difficult to make anyway.  I
know that this may be the one chance we have to get FERC to make a finding.
If FERC does make the finding, it will undoubtedly be appealed.  I do not
know how to assess the likelihood that FERC will make the requested finding,
and if they do whether it will be upheld on appeal, so it is difficult for
me to do a risk benefit analysis.

 If we are going to go this route, I would take out the conditional
phrase on page 7 in the word version that reads:  "if they were not in
violation of market rules established under the ISO's and PX's tariffs."

 I know Mary is still working on the economics response.  I will look
at as soon as it comes in.

Thanks
Gary




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