We now have a refund order from FERC which I have not yet  read. The issue of ENA's liability is, as you would guess, complicated. Are we still on track for a short meeting to discuss?

 -----Original Message-----
From: 	Peng, Gary  
Sent:	Thursday, July 26, 2001 10:00 AM
To:	Rogers, Rex; Sanders, Richard B.; Eickenroht, Robert
Subject:	RE: Second Quarter 10-Q Litigation Disclosure

	Richard,  see below:

9.  RECENT DEVELOPMENTS

   Developments in the California Power Market.  During
2000, prices for wholesale electricity in California
significantly increased as a result of a combination of
factors, including higher natural gas prices, reduction in
available hydroelectric generation resources, increased
demand, over-reliance on the spot market for electricity and
limitations on supply.  California's regulatory regime
instituted in 1996 permitted wholesale price increases but
froze retail prices below market levels.  The resulting
disparity between costs of supply and customer revenues
caused two of California's public utilities, Pacific Gas &
Electric Company (PG&E) and Southern California Edison
Company (SCE), to accrue substantial unrecovered wholesale
power costs and certain obligations related to the
difference between third party power purchase costs and
frozen rates charged to retail customers.  PG&E and SCE have
defaulted on or are challenging payments owed for certain
outstanding obligations, including wholesale power purchased
through the California Power Exchange (the Power Exchange),
from the California Independent System Operator (the
Independent System Operator), and from qualifying
facilities.  In addition, PG&E and the Power Exchange each
have filed a voluntary petition for bankruptcy.

   Various legislative, regulatory and legal remedies to the
energy situation in California have been implemented or are
being pursued, and may result in restructuring of markets in
California and elsewhere.  Additional initiatives are likely
at the Federal, state and local level, but it is not
possible to predict their outcome at this time.

   Enron has entered into a variety of transactions with
California utilities, the Power Exchange, the Independent
System Operator, end users of energy in California, and
other third parties, and is owed amounts by certain of these
entities.  Enron has established reserves related to such
activities and believes that the combination of such
reserves in accounts receivables and price risk management
assets and other credit offsets with such parties are
adequate to cover its exposure to developments in the
California power market.  Due to the uncertainties involved,
the ultimate outcome of the California power situation
cannot be predicted, but Enron believes these matters will
not have a material adverse impact on Enron's financial
condition or results of operations.

   India.  Enron indirectly owns 50% of the net voting
interest in Dabhol Power Company (Dabhol), which owns a 740
megawatt power plant and is developing an additional 1,444
megawatt power plant together with an LNG regasification
facility in India.  Enron accounts for its investment in
Dabhol under the equity methodand the debt of Dabhol is non-
recourse to Enron.  Dabhol has been in dispute with the
Maharashtra State Electricity Board (MSEB), the purchaser of
power from Dabhol, and the Government of Maharashtra (GOM)
and the federal government of India (GOI), the guarantors of
payments by the MSEB pursuant to the terms and conditions of
the power purchase agreements (PPA) and the other project
documents.  The contract disputes relate principally to the
failure by the MSEB to pay certain capacity and energy
payments under the PPA, and the failure of the GOM and GOI
to satisfy certain guarantee obligations under the project
documents.  There is no assurance that Dabhol will be able
to resolve such disputes to its favor and to successfully
collect on and to enforce any judgment or settlement.
However, Dabhol believes that the MSEB's actions are in
clear violation of the terms of the PPA, and Dabhol intends
to pursue all available legal remedies under the project
documents.  Accordingly, Enron does not believe that any
contract dispute related to Dabhol would have a material
adverse impact on Enron's financial condition or results of
operations.

   Termination of Portland General Sales Agreement.  On
April 26, 2001, Enron announced that the previously
disclosed agreement to sell Portland General to Sierra
Pacific Resources had been terminated by the mutual consent
of both parties because the effect of developments in
California and Nevada on the purchaser had made completion
of the transaction impractical.

 -----Original Message-----
From: 	Rogers, Rex  
Sent:	Thursday, July 26, 2001 8:50 AM
To:	Peng, Gary; Sanders, Richard B.; Eickenroht, Robert
Subject:	RE: Second Quarter 10-Q Litigation Disclosure

Gary:  I'm back in town, but will be out tomorrow (Friday) and Monday next week.  Will be in all next week after Monday.  Thanks

 -----Original Message-----
From: 	Peng, Gary  
Sent:	Wednesday, July 25, 2001 5:49 PM
To:	Sanders, Richard B.; Rogers, Rex; Eickenroht, Robert
Subject:	RE: Second Quarter 10-Q Litigation Disclosure

Richard,

We will need to revisit the California issue with Rex before filing the 10Q.  I will schedule a meeting after Rex and Bob Butts get back into town.

Gary

 -----Original Message-----
From: 	Sanders, Richard B.  
Sent:	Wednesday, July 25, 2001 5:46 PM
To:	Rogers, Rex; Eickenroht, Robert; Peng, Gary
Subject:	FW: Second Quarter 10-Q Litigation Disclosure


Are we doing anything on California and do you need my input?
 -----Original Message-----
From: 	Cheek, Charles  
Sent:	Monday, July 23, 2001 12:03 PM
To:	Peng, Gary; Eickenroht, Robert; Sanders, Richard B.
Cc:	Rogers, Rex
Subject:	RE: Second Quarter 10-Q Litigation Disclosure

The Rio Piedras Explosion Litigation note needs to be updated. My suggested note follows with deletions being noted by "***" and additions noted in bold.  Please let me know if you have any questions are comments.

____________ 

On November 21, 1996, an explosion occurred in *** the Humberto Vidal Building in San Juan, Puerto Rico. The explosion resulted in fatalities, bodily injuries and damage to the building and surrounding property. San Juan Gas Company, Inc. (San Juan Gas), an Enron affiliate, operated a propane/air distribution system in the vicinity, but did not provide service to the building. Enron, San Juan Gas, four affiliates and their insurance carriers were named as defendants, along with several third parties, including The Puerto Rico Aqueduct and Sewer Authority, Puerto Rico Telephone Company, Heath Consultants Incorporated, Humberto Vidal, Inc. and their insurance carriers, in numerous lawsuits filed in U.S. District Court for the District of Puerto Rico and the Superior Court of Puerto Rico. These suits seek damages for wrongful death, personal injury, business interruption and property damage allegedly caused by the explosion. After nearly four years without determining the cause of the explosion, all parties *** agreed not to litigate further that issue, but to move these suits toward settlements or trials to determine whether each plaintiff was injured as a result of the explosion and, if so, the lawful damages attributable to such injury. The defendants *** agreed on a fund for settlements or final awards. Numerous claims have been settled and ten cases involving 19 plaintiffs are scheduled for trail in the United States District Court beginning on December 10, 2001. No cases have yet been scheduled for trail in the Superior Court. Although no assurances can be given, Enron believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position or results of operations. 
____________


 -----Original Message-----
From: 	Peng, Gary  
Sent:	Thursday, July 19, 2001 3:37 PM
To:	Cheek, Charles; Eickenroht, Robert; Sanders, Richard B.
Cc:	Rogers, Rex
Subject:	Second Quarter 10-Q Litigation Disclosure

Find below the Litigation and Other Contingencies footnote from the the March 31, 2001 Form 10-Q.  Please update the section of the disclosure for which you are responsible for inclusion in the second quarter 2001 Form 10Q .  Also, please let me know if there are any new items that should be considered.

Please respond no later than Monday July 30.

Thanks,

Gary
3-6841
	

3. LITIGATION AND OTHER CONTINGENCIES 
Enron is a party to various claims and litigation, the significant items of which are discussed below. Although no assurances can be given, Enron believes, based on its experience to date and after considering appropriate reserves that have been established, that the ultimate resolution of such items, individually or in the aggregate, will not have a material adverse impact on Enron's financial position or results of operations. 
Litigation. In 1995, several parties (the Plaintiffs) filed suit in Harris County District Court in Houston, Texas, against Intratex Gas Company (Intratex), Houston Pipe Line Company and Panhandle Gas Company (collectively, the Enron Defendants), each of which is a wholly-owned subsidiary of Enron. The Plaintiffs were either sellers or royalty owners under numerous gas purchase contracts with Intratex, many of which have terminated. Early in 1996, the case was severed by the Court into two matters to be tried (or otherwise resolved) separately. In the first matter, the Plaintiffs alleged that the Enron Defendants committed fraud and negligent misrepresentation in connection with the "Panhandle program," a special marketing program established in the early 1980s. This case was tried in October 1996 and resulted in a verdict for the Enron Defendants. In the second matter, the Plaintiffs allege that the Enron Defendants violated state regulatory requirements and certain gas purchase contracts by failing to take the Plaintiffs' gas ratably with other producers' gas at certain times between 1978 and 1988. The trial court certified a class action with respect to ratability claims. On March 9, 2000, the Texas Supreme Court ruled that the trial court's class certification was improper and remanded the case to the trial court. The Enron Defendants deny the Plaintiffs' claims and have asserted various affirmative defenses, including the statute of limitations. The Enron Defendants believe that they have strong legal and factual defenses, and intend to vigorously contest the claims. Although no assurances can be given, Enron believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position or results of operations. 
On November 21, 1996, an explosion occurred in or around the Humberto Vidal Building in San Juan, Puerto Rico. The explosion resulted in fatalities, bodily injuries and damage to the building and surrounding property. San Juan Gas Company, Inc. (San Juan Gas), an Enron affiliate, operated a propane/air distribution system in the vicinity, but did not provide service to the building. Enron, San Juan Gas, four affiliates and their insurance carriers were named as defendants, along with several third parties, including The Puerto Rico Aqueduct and Sewer Authority, Puerto Rico Telephone Company, Heath Consultants Incorporated, Humberto Vidal, Inc. and their insurance carriers, in numerous lawsuits filed in U.S. District Court for the District of Puerto Rico and the Superior Court of Puerto Rico. These suits seek damages for wrongful death, personal injury, business interruption and property damage allegedly caused by the explosion. After nearly four years without determining the cause of the explosion, all parties have agreed not to litigate further that issue, but to move these suits toward settlements or trials to determine whether each plaintiff was injured as a result of the explosion and, if so, the lawful damages attributable to such injury. The defendants have agreed on a fund for settlements or final awards. Numerous claims have been settled. Although no assurances can be given, Enron believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position or results of operations. 
Trojan Investment Recovery. In early 1993, Portland General Electric (PGE) ceased commercial operation of the Trojan nuclear power generating facility. The Oregon Public Utility Commission (OPUC) granted PGE, through a general rate order, recovery of, and a return on, 87 percent of its remaining investment in Trojan. 
The OPUC's general rate order related to Trojan has been subject to litigation in various state courts, including rulings by the Oregon Court of Appeals and petitions to the Oregon Supreme Court filed by parties opposed to the OPUC's order, including the Utility Reform Project(URP) and the Citizens Utility Board (CUB). 
In August 2000, PGE entered into agreements with the CUB and the staff of the OPUC to settle the litigation related to PGE's recovery of its investment in the Trojan plant. Under the agreements, the CUB agreed to withdraw from the litigation and to support the settlement as the means to resolve the Trojan litigation. The OPUC approved the accounting and ratemaking elements of the settlement on September 29, 2000. As a result of these approvals, PGE's investment in Trojan is no longer included in rates charged to customers, either through a return on or a return of that investment. Collection of ongoing decommissioning costs at Trojan is not affected by the settlement agreements or the September 29, 2000 OPUC order. With the CUB's withdrawal, the URP is the one remaining significant adverse party in the litigation. The URP has indicated that it plans to continue to challenge the OPUC order allowing PGE recovery of and a return on its investment in Trojan. 
Enron cannot predict the outcome of these actions. Although no assurances can be given, Enron believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position or results of operations. 
Environmental Matters. Enron is subject to extensive federal, state and local environmental laws and regulations. These laws and regulations require expenditures in connection with the construction of new facilities, the operation of existing facilities and for remediation at various operating sites. The implementation of the Clean Air Act Amendments is expected to result in increased operating expenses. These increased operating expenses are not expected to have a material impact on Enron's financial position or results of operations. Enron's natural gas pipeline companies conduct soil and groundwater remediation on a number of their facilities. Enron does not expect to incur material expenditures in connection with soil and groundwater remediation.