Re: EES - RAC Deal Approval Meeting

I understood the "validation" process to be a fairly flexible name applied to
a wide variety of approaches. What we specifically discussed, and what scott
s. left prepared and committed to do, involved looking at individual curves,
the assumptions underlying them and some process (yet to be specifically
determined) for addressing updates. We agreed to start with the top 20
curves and especially those which are involved in the upcoming deals.

I think the confusion is in what the term validation means. In the ENA
context it means one thing; in this context it means what we discussed (which
was in Jim's memo and, as you'll recall, we went through point-by-point).
Let's just get this done.
---------------------- Forwarded by Steven J Kean/HOU/EES on 04/18/2000 05:10
PM ---------------------------

James D Steffes
04/18/2000 03:46 PM
To: Scott Gahn/HOU/EES@EES
cc: john Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, David Gorte@ECT, Rick
Buy@ECT, Scott Gahn@EES, Jeremy Blachman@EES, Scott Stoness@EES, Karen L
Barbour@ECT, Steven J Kean@EES, Harry Kingerski@EES, Gia
Maisashvili/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Vladimir Gorny/HOU/ECT@ECT
Subject: Re: EES - RAC Deal Approval Meeting

Scott --

We should talk about what was agreed to at the meeting.

My discussions with others indicated that both (a) a curve validation process
and (b) a deal-by-deal review would be undertaken. The deal-by-deal review
is especially critical during the implementation of a structured curve
validation process. In addition, even when the curve validation process is
fully up and running, we should continue looking at major position impacts in
new transactions. There are many curves to review. It seems reasonable to
look at the critical rate curves as appropriate.

Let me know.

Jim Steffes

Scott Gahn
04/15/2000 07:25 AM
To: John Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: David Gorte@ECT, Rick Buy@ECT, Scott Gahn@EES, Jeremy Blachman@EES, Scott
Stoness@EES, Karen L Barbour@ECT, Steven J Kean@EES, James D Steffes@EES,
Harry Kingerski@EES, Gia Maisashvili/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
Subject: Re: EES - RAC Deal Approval Meeting

In the interest of clarity: It was agreed that ongoing curve validation
consistent with that followed on wholesale curves would be instituted. It
was further agreed that certain information would be provided by Scott
Stoness to get this process going. Such ongoing validation should make the
impractical deal-by-deal review described below both redundant and
unnecessary.

I assume the list below did not contemplate the type of curve validation
process we discussed and agreed to at the meeting.

To: David Gorte@ECT, Rick Buy@ECT, Scott Gahn@EES, Jeremy Blachman@EES, Scott
Stoness@EES, Karen L Barbour@ECT
cc: Steven J Kean@EES, James D Steffes@EES, Harry Kingerski@EES, Gia
Maisashvili/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
Subject: EES - RAC Deal Approval Meeting

As mentioned in yesterday's meeting, below are Jim Steffes' comments relative
to what information should be presented to Government Affairs when EES brings
a deal to RAC.
---------------------- Forwarded by John Neslage/ENRON_DEVELOPMENT on
04/14/2000 02:53 PM ---------------------------

James D Steffes@EES
04/09/2000 12:11 PM
To: Steven J Kean/HOU/EES@EES, Harry Kingerski/HOU/EES@EES, John Neslage
cc: Marcia A Linton/HOU/EES@EES

Subject: EES - RAC Deal Approval Meeting

I received word late last week that Dave Gorte (works for Rick Buy) is
setting up a meeting to discuss the process under which EES will have its
deals considered by RAC.

I think that we should argue that the following package of information be
pre-assembled and provided to Govt Affairs when EES brings a deal to RAC:

1. List of each position by utility and by rate class within the deal

2. Regulated Rate forecasts by utility and by rate class for each position in
the deal. Not just the "scalars" but also the absolute $/Mwh.

3. For each impacted position, the key assumptions contained within the
curves -
a. deregulation date (if any)
b. stranded cost roll-off date (if any)
c. standard offer end date (if any)
d. other rate reduction dates and amounts (if any)

4. Revenue side or Cost side contract terms that impact the deal (for
example, movement in pricing terms given some event)

I also think that we should have at least 3 working days to review this
package.

If anyone can think of anything else that would ease our analysis, I would be
game.

Thanks.

JDS