Rogers,

Enron Energy Services, Inc. ("EESI") submitted application to become a NEPO=
OL member, to be effective January 1, 2000. EESI was approved by the NEPOO=
L Participants Membership Subcommittee at its January 24, 2000 meeting. On=
e requirement of NEPOOL membership is to satisfy the Financial Assurance Po=
licy for NEPOOL Members. EESI, Enron Energy Marketing Corp, and Enron Powe=
r Marketing, Inc. are all members of NEPOOL and have chosen to satisfy the =
Financial Assurance Policy by issuance of Performance Bond(s), rather than =
corporate guaranty, due to Enron's disagreement with the Form of Corporate =
Guaranty required by NEPOOL.

EESI, via Fireman's Fund Insurance Company, issued a Performance Bond in th=
e amount of $8,000,000 in June 2000; the Performance Bond was reissued in J=
une 2001 in the amount of $8,000,000. EESI received a letter from ISO New =
England dated October 10, 2001, addressed to Becky Pitre (EESI Settlements)=
and received by Becky probably October 12, 2001, indicating that EESI's cu=
rrent Performance Bond was insufficient and that EESI needed to increase th=
e amount to $11,703,018.75 to cover EESI's current activity level. Becky d=
elivered the October 10th letter to my attention whereby I took the letter=
to EESI Legal Department (Karen Cordova) and informed Karen that EESI need=
ed to increase the Performance Bond to $20,000,000. Karen requested Credit=
Department (Nichole Gunter) initiate an increase in the Performance Bond t=
o the $20,000,000 level; to the best of my knowledge the initial conversati=
on with Credit Department was October 12, 2001. In telephone conversations=
with ISO-NE, Enron's Credit Department personnel were informed by ISO-NE t=
hat in order to avoid Financial Assurance Default the matter needed to be r=
esolved within ten (10) days of the date of the October 10, 2001 letter (Oc=
tober 19, 2001), however the letter did not indicate such.=20

I was notified by Credit Department on October 16, 2001 that the bond compa=
ny Enron utilizes for performance bond(s) would not process our Performance=
Bond request for increase until Enron paid the bond company for outstandin=
g invoices for "other" performance bonds (bond renewals), approximately $1=
50,000. The "other" performance bond invioces had been bounced around EESI=
, since June 2001, to various individuals (i.e. Greg Sharp, Mark Mueller, J=
eff Golden, Scott Mills) and had still remained unpaid. Payments for the "=
other" performance bonds were made and the bond company processed our reque=
st for increase in the EESI NEPOOL Performance Bond to $20,000,000, which w=
as issued by the bond company on October 23, 2001, executed by EESI on Octo=
ber 23, 2001 and forwarded via FAX and Overnight Mail to ISO-NE on October =
23, 2001. EESI was unable to comply with the October 19, 2001 deadline to =
resolve the Financial Assurance Default due to complications with the bond =
company as mentioned above. Credit Department personnel informed ISO-NE pe=
rsonnel that EESI would not meet the October 19, 2001 deadline, but was wor=
king diligently to resolve the matter; Credit Department personnel sent via=
FAX, a copy of the request to the bond company for revisions to the Perfor=
mance Bond to ISO-NE personnel on October 19, 2001. =20

I notified Dan Allegretti, (Enron Government Affairs & Chariman, NEPOOL Par=
ticipants Committee) of the entire situation prior to October 19, 2001. Da=
n indicated that he did not think there would be any problems, but to get t=
he matter resolved as quickly as possible. Dan advised me that the implicat=
ions of the Financial Assurance Default would result in communications to t=
he Membership Subcommittee and that when the next letter was published, the=
following month, EESI would no longer be listed as being in default. On O=
ctober 19, 2001 another letter was sent to Becky Pitre (EESI Settlements) f=
rom Edward McKenna, Vice President & Chief Financial Officer informing EESI=
that "Enron Energy Services, Inc. has not maintained the required level of=
financial assurance for 10 days or more, and has had a total combination o=
f 3 financial assurance and/or payment defaults in the last 12 months, whic=
h qualifies them as having 2 (two) Level 1 defaults. The ISO has been in c=
ontact with Enron Energy Services, Inc. through multiple telephone communic=
ations, and to date the financial assuvance default has not been cured. Th=
erefore, per the established procedure, we are forwarding this information =
to the NEPOOL Membership Subcommittee for action by them." According to Da=
n Allegretti the Memberhsip Subcommittee reports to him, as Chariman of the=
Members Subcommittee, and he would discuss the issue with them. The previ=
ous two Financial Assurance Defaults mentioned the October 19, 2001 letter =
occurred (i) December 2000, when payment was received 1-2 days late and was=
automatically resolved when payment was received and (ii) September 2001, =
when Financial Assurance Default occurred and was resolved through market a=
ctivity. To the best of my knowledge, EESI was unaware of either the Decem=
ber 2000 Payment Default or the September 2001 Financial Assurance Default,=
and no information was received by EESI from ISO-NE relative to either inc=
idence.

According to (i) Protocal for the Initation of Membership Termination Proce=
edings and (ii) conversations with Dan Allegretti, the issue should be reso=
lved with the receipt on October 24, 2001 of the Performance Bond by ISO-NE=
. I have also advised the ISO-NE, in the future, to send communications to=
EESI's Credit Department and not EESI's Settlements. Also, Dan Allegretti=
is investigating the facts leading the the October 19, 2001 letter with re=
presentatives from ISO-NE.

I left message for Molly Harris as you requested. I was able to speak to De=
nise Furey and Nichole Gunter, who both indicated that they would speak wit=
h Molly as they all work together. =20

Let me know if you need any additional information.

Richard =20

=20