PRIVILEGED AND CONFIDENTIAL

PRIVILEGED AND CONFIDENTIAL
Julia

The tax issue, as far as I see it does not do anything for us except put us in the position that we will have to make an application for a power marketing certificate using whatever vehicle provides the tax advisors with the solution they are seeking.

With Enron under the spotlight at the moment any filing at FERC would be picked up by the media and could be used to cause untold further damage to Enron's credibility and reputation. We could not for example provide any credible reason for setting up such an entity without revealing our true intent. In addition, the FERC Commissioners are going to be wary about expediting any application at the moment for an Enron entity which does not have an interest in a generating unit, for example.

As for Clinton Energy Services Management Inc, which has a power marketing certificate, we are getting an opinion from outside Counsel to confirm that if this entity was moved to become a subsidiary of Enron Corp. that because of the current ownership structure no filing will be necessary with FERC. We at least retain this option and can thereby proceed fairly quickly if required.

As to trading without a power marketing certificate I could not support this course of action. In addition, we would probably be in breach of any agreement we have with counterparties enabling them to terminate the agreements immediately.

If you need me I will be on 713 533 0313. and will be logged on.

Marcus