Re: Model Development Review

---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 12/30/99
04:33 PM ---------------------------

Vince J Kaminski
09/21/99 12:46 PM
To: Derek Claybrook/AA/Corp/Enron@ENRON
cc: Patty Grutzmacher/AA/Corp/Enron@Enron, Vince J Kaminski/HOU/ECT@ECT,
Stinson Gibner/HOU/ECT@ECT, Andrew Schuleman/AA/Corp/Enron@Enron, Ted
Murphy/HOU/ECT@ECT
Subject: Re: Model Development Review

Derek,

I am sending you the information you requested in your message.

Please, keep in mind that:

1. Even if we develop the model, in most cases we don't control it and have
no
oversight over its uses. A spreadsheet or generic tools we develop can be
easily
used and/or modified by the end user, without our knowledge
and involvement.

2. We typically act as internal consultants and solve narrow, highly complex
problems that require
special skills. We may not provide solutions to the entire problem,
though our involvement may
be interpreted later as our unconditional endorsement of the proposed
solution.

Vince Kaminski

Derek Claybrook@ENRON
09/01/99 05:28 PM
To: Stinson Gibner/HOU/ECT@ECT
cc: Patty Grutzmacher/AA/Corp/Enron@Enron, Andrew
Schuleman/AA/Corp/Enron@Enron, Vince J Kaminski/HOU/ECT@ECT
Subject: Model Development Review

Over the past few weeks, we have spent time talking to you as well as others
involved in model development. As we have completed the first phase of our
project, we are know moving into the second phase which is testing. As part
of this phase, we need your help in identifying Research Group's involvement
in specific models. We would appreciate if you could please respond back to
us with your involvement in developing/reviewing these models based on the
criteria set forth below.

Based on our review of Schedule B, we have determined the following Exotic
Options were valued by models that are not included in the Research Group
Library.

Commodity Book Description (per Schedule B)

Gas NG Price FPL - PV Effect
Gas NG Price FPL - PV Effect
Gas NG Price FPL - PV Effect
Gas West West Basis Options 2 Model
Gas Central Basis Options

Power Power-East LCRA - Spread Option
Power Power-West Swaption - Welded Tube

Liquids Refined Products Heating Oil Exotic Options - Valued in Lotus
(ASPREAD)

NOX NOX Exotic Option
Interest Rate Interest Rate Interest Rate

In addition, we would appreciate if you could describe Research Group's
involvement on the models listed below.

Aruba
Oglethorpe
NPI (JEDI)
Peakers
Bug
Snake River
Structured Credit (Fair Value)

Developing/Reviewing Criteria:
Low - discussed modeling issues over the phone and/or answered one or two
general questions

Medium - answered several questions and were consulted on coding issues

High - discussed the model in detail, provided assistance with coding and
may have developed a portion of the model

Total Review - completely reviewed the model

Complete Development - Research Group developed the entire model

Once we have an understanding of Research Group's involvement, we will
perform more detailed testing procedures.
Thanks for your cooperation in this matter, and if you have any questions,
please give myself (x3-6496) or Andy (x3-3348) a call.