Dear Dan, 

As discussed in our recent conversation, we (Enron North America "ENA")  need 
to understand the issues related to the
distinction between "investor owned utilities" (or "IOUs") and municipal 
utilities (or "municipals") in connection with derivatives
activity.  In the U.S., this distinction enables us to treat IOUs as general 
corporates.  Thus, we negotiate our standard ISDA
Master with an IOU, except that we add an Additional Termination Event to 
prevent the IOU from taking an adverse stance in
its state public utility commission proceedings.  A copy of our standard ISDA 
Schedule which includes the Additional
Termination Event in Part 1 (j) is attached for your review. 



Our approach with respect to U.S. municipals is dramatically different.  When 
negotiating an ISDA Master with municipals, we
use a Schedule modeled after the 1992 U.S. Municipal Counterparty Schedule, 
having additional reps, the added concept of
"Incipient Illegality" and an enforceability opinion.  A copy of that 
Schedule and our general template form of legal opinion is
also attached for your reference. 




We would like to understand whether this distinction in the utility world 
also exists in Canada, and if so, in all Canadian provinces, and whether 
there is a distinction when a municipal is an investor in an IOU (as we 
understand that the government may assist a utility to emerge from 
bankruptcy).  In that regard, would you recommend that ENA use distinct ISDA 
Schedules for these types of entities and/or would you recommend specific 
changes to our format?  Should we add any additional representations to our 
form of Legal Opinion?

Also, we would like to point out that we use the ISDA agreements to govern a 
wide variety of financial derivative transactions including derivatives based 
on interest rates, equities, bonds, energy commodities (such as oil, natural 
gas, electricity, etc...), paper and pulp products, currencies and weather.  
Please take this into account when giving your advice. 

As I mentioned on the telephone the most pressing ISDA at hand is the one we 
have been asked to do with Ontario Power Generation. They are contemplating 
entering into weather derivatives with us. I understand from speaking with 
them that they  are an "Ontario Business Corp. Act" corporation and that the 
Ontario Government has at least a partial shareholder stake in their 
company.  

I would propose for Sara and I to speak with you and Steve Ashborn on Monday 
to at least discuss what we need to do with regard to OPG. Please advise when 
would be convenient for you. (For us, any time from 3 pm Houston time onwards 
should be fine). 

Many thanks, 

Shari Stack