Discussion with Scott Miller

I spoke with Scott Miller yesterday about several issues, so of course
California came up. Scott expressed frustration with the California
situation and indicated that he thinks California will never be able to move
away from its current problems without a comprehensive solution, led by an
entity like the Administration. Scott said he thinks all the parties need to
come to the table and reach some sort of agreement to net out the differences
between what suppliers are owed and what California thinks it is owed in
refunds. Once that is accomplished, the parties would then agree to enter
into 1-3 year supply contracts at agreed-upon prices for the bulk of
California's power needs.

Scott has been floating this idea with his colleagues (unnamed) who countered
with "Would Ken Lay agree to something like that?" I told him that I agree
there needs to be a comprehensive solution to California but I did not know
what Enron would agree to. I asked him if he has heard anything about the
Vice President's task force and whether the report will propose something
like this. Scott indicated that he and his group have had no contact with
the task force and he has no information as to what will be in the report.
This workout plan is just Scott's idea for now.

Scott said he thinks the current scenario is unworkable, that there is not a
lot of internal support for Hebert's approach, and that things will get
worse. For example, Scott said that although generators are the only
suppliers subject to cost justification at present, if the problems continue,
marketers will be subject to the same cost justification in the future.

I thought you all would be interested in this conversation. I told Scott
that since Joe has changed jobs, that he should feel free to call me with
questions or to talk about things like this, and he also told me to call him
whenever we need him. Although Scott is not expecting a response from us on
his California idea, if we do have some sort of response, we may want to
convey it to him just to show our interest in working with him and his group
and that we have a similar interest in resolving the problems in California.