ETS Risk System

Rod,
Caroline forwarded me your questions regarding the Risk System so I wanted to
go ahead and respond since Steve is out this week.

I don't think Philippe requires the level of due diligence that we performed,
but we were getting questioned on buying a 3rd party product vs. using an
Enron Risk System. We did more research and got the other groups involved so
that they would understand our decision. I believe everyone is now
comfortable with our purchase decision.

In our analysis of systems, we selected the Caminus product in part because
we had several individual references from Arthur Andersen, Deliotte &Touche
and Ernst & Young. These organizations, especially Arthur Andersen, have
audited this application and have actually participated in numerous
implementations. Ernst & Young recently selected Caminus for Equitable
Resources. Arthur Anderson implemented the application for Conoco and 5 or
6 other companies, and Deloitte Touche recently selected the product for
Tractabel. After talking with individuals from these accounting firms, we
felt very confident that the product was sound, and we should not have audit
concerns. Obviously, we have a lot of business procedures that have to be
established, and there is time in the work plan to do that work, but a lot of
those decisions drive how the application is configured so we need to get the
product purchased work through the details of how we implement the new
business procedures since the system does drive a lot of processes.

Regarding costs, we have an approved work order for $650,000 which covers all
the initial hardware, software, implementation costs and first year
maintenance. This cost does represent a very limited implementation with
only 10 concurrent users, no customization except a few reports, and no
electronic interfaces or data conversion. The assumption is that initially
the volume would be so low that an automated interface may not be cost
justified, and the data would manually be loaded since it was low volume as
well. The on-going costs are estimated at approximately $100,000/year. We
did not perform a separate cost/benefit analysis as this was in the original
cost of the Revenue Management RAROC. Let me know if you have any other
questions or there are open issues that we need to address prior to
completing the contract. We are hoping to get this signed and the project
underway next week. Thanks.