BPA/EEI Update

Elizabeth and Christian:

This morning I spoke with Geritt Hull, Bonneville's trading lawyer, about
putting an EEI in place between Enron and BPA. He said there was "no
interest" in using the EEI at this time. Before, the agency resisted using
the agreement because it was unfamiliar with the EEI. Now, however, the
agency has reviewed the EEI---and decided it didn't like what it saw. This
"review" appears to have consisted of (1) an internal legal meeting and (2) a
meeting this morning between Geritt and Dave Mills (who heads BPA's trading
floor). After a first look, BPA has the following concerns about the EEI:

1. If BPA does some transactions under the EEI, it will then have two
different agreements. BPA prefers having one standardized agreement (WSPP).

2. The Schedule M provisions are unfavorable to governmental entities. The
WSPP does not have these additional obligations.

3. Tracking of credit/mark to market exposure is a concern for BPA because
it does not have systems in place to do this. I explained to Geritt that
these provisions would be for BPA's benefit. BPA need not calculate these
amounts day-to-day; it could wait until it hit the "nervous nellie" standard,
and then do the calculations, at which time, if the thresholds had been met,
it could call for more collateral. This seemed to help; BPA had seen this
part as a burden---"oh, we'll have to start doing daily mark-to-market
calculations!"

4. "This agreement seems to favor marketers." I reminded Geritt that BPA is
a marketer, too. "Well, we haven't been selling much lately. We're buyers
now." (This is a disconcerting because at this time of year BPA is usually
spilling water for salmon AND selling lots of extra power).

5. Finally, and perhaps most importantly, the head of BPA's trading floor,
Dave Mills, is opposed to the agreement because he doesn't want to use a
second master.

I asked Geritt who could say "yes" to the EEI and he said, "Dave Mills, if
anyone." But he also said that "like everything at BPA, a decision like this
would be part of a broad consensus."

Geritt has been charged with preparing an analysis of the two agreements.

Next Steps

Christian has suggested that we ask Greg Wolfe and Holli Krebs to put
pressure on the BPA traders to use this agreement.

I am taking Geritt to lunch on Wednesday.

----Steve

Geritt said that BPA has given the EEI an internal review and decided not to
made the following conclusions:

1. Using the EEI