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Enron Mail |
We do not seem to be answering the questions and the format makes it pretty=
=20 difficult to understand where we are answering each question. Is this a=20 style we use with FERC? If so, fine. But if not, here's my attempt, I hav= e=20 changed quite a few answers too. Question1: In providing an answer to our questions regarding risk assessmen= t=20 or management, would you please provide an explanation to the following? W= e=20 understand that EOL requires that a counter party, before accessing EOL to = do=20 business with Enron North America, must undergo a credit worthiness=20 evaluation. When a counter party executes or clicks on a price, EOL does = an=20 instant credit check before confirming the transaction. However, Enron may not only buy from a counter party, it may sell. What so= rt=20 of creditworthiness standards must Enron provide to a counter party utilizi= ng=20 EOL to purchase from Enron? Are there industry standard creditworthiness agreements regarding counter= =20 party credit risk that Enron uses? If yes, may we have copies? If Enron= =20 utilizes its own agreements, please provide us with a copy. All counterparties are assessed by our credit department prior to any=20 transaction being entered into by Enron whether the transaction is being=20 conducted over the phone or through EnronOnline. Enron, as the principal t= o=20 all purchases and sales on EnronOnline and when completing transactions on= =20 the telephone or in writing, requires counterparties to be creditworthy. I= n=20 addition, Enron=01,s risk management process is required to be approved by = the=20 Enron Board of Directors, according to Securities Exchange Act regulations = as=20 a publicly held company. Enron=01,s risk policies are provided in Enron=01= ,s=20 publicly available [[10-Q??]]_______ audited financial statements filed on = a=20 quarterly and annual basis with the SEC. Enron maintains a separate risk= =20 management group that has oversight over all transactions done by all Enron= =20 trading units and that ensures compliance with the risk management policies= . =20 This group has a separate reporting line directly to the office of the=20 Chairman of Enron Corp. and has the authority to instruct the suspension of= =20 transactions in order to ensure that trading limits are not exceeded. In= =20 addition, every counterparty of Enron has to clear a credit check before th= ey=20 can transact through EnronOnline. The Credit Risk Management group approve= s=20 a counterparty for a specific credit limit and tenor limit which are embedd= ed=20 within the EnronOnline database. Every transaction is passed through an= =20 electronic credit check to assure that the credit limits and tenor limits a= re=20 not violated prior to Enron accepting the counterparty=01,s bid or offer vi= a=20 EnronOnline, such credit checks are done automatically and there is no huma= n=20 intervention. As with all Enron transactions, the credit limit checks=20 utilize a potential exposure calculation to take into account future price= =20 volatility. The Credit Risk Management group monitors transaction flow on= =20 all Enron transactions including EnronOnline continually. EnronOnline doe= s=20 provide CRM with electronic alerts when customers approach credit limits or= =20 breach credit limits. No further transactions are executed unless CRM is= =20 sufficiently satisfied that the credit position has been mitigated such tha= t=20 credit limit is still available. EnronOnline uses the same credit policy as other transactions Enron enters= =20 into, whether we are buying or selling. The transactions entered into on= =20 EnronOnline are all governed by either a Master Agreement or the General=20 Terms and Conditions (which are a shorter form of contract and differ for= =20 each commodity, these are all available on the web-site). A Master Agreeme= nt=20 is negotiated with the Counterparty offline and includes negotiated bilater= al=20 credit terms and these terms govern any transactions entered into on=20 EnronOnline. The General Terms and Conditions which will apply to=20 EnronOnline transactions if there is no Master Agreement in place between= =20 Enron and the counterparty include industry standard credit requirements=20 which the counterparty chooses to accept or not online, should the=20 counterparty not want to accept to language in the contract (for credit or= =20 other reasons), the Helpdesk for EnronOnline will facilitate contact betwee= n=20 the Enron Credit group or Enron Legal group with the counterparty allowing= =20 the Counterparty to negotiate terms which may be more appropriate to them. Question 2: I understood Dave Forster to state that EOL does not collect= =20 data regarding where a customer's mouse is moving on the system. However,= =20 does EOL require customers to have cookies enabled? If yes, does EOL=20 collect, use or manage data regarding cookies? It is correct that Enron does not collect data regarding where a customer's= =20 mouse is moving on the system. It is also correct to note that we have no= =20 capability of knowing where the customer's mouse is. =20 EnronOnline does not require customers to have cookies enabled. =20 Question 3: Also, why doesn't EOL publish a "ticker" of completed trades=20 showing prices and quantities? Does EOL have any plans to start publishing= =20 such data? If yes, when? There are now several options for viewing historical pricing/transaction da= ta=20 from EnronOnline. Reuters recently began showing quotes from EnronOnline= =20 (http://about.reuters.com/enrononlinequotes/), which also provides customer= s=20 with the ability to reference historical prices from the date at which they= =20 acquire access. In addition, EnronOnline provides a number of online chart= s=20 for products, which graphically depict historical transaction prices. =20 Customers can also run reports to see their own transactions and download t= he=20 results into an Excel spreadsheet on EnronOnline The system also allows fo= r=20 administrative users, thereby allowing the back offices of counterparties t= o=20 monitor the trading activity and deal with it appropriately in line with=20 their own systems. Enron does not publish transactions completed via EnronOnline however Enron= =20 will provide information on such transactions in order to ensure market=20 activity is being correctly reflected in the approriate market indices. For= =20 example, Enron does provide EnronOnline transaction data to the Natural Gas= =20 Exchange in Calgary in order to ensure that indices produced by Canadian=20 Enerdata accuately reflect the activity in the market place (this will=20 commence on July 1, 2001). At the end of each day, EnronOnline makes=20 available to all customers through EnronOnline the weighted average price o= f=20 that day's transactions. The data associated with US Natural Gas is sent i= n=20 this format to Gas Daily for inclusion in their automated exchange index. Question 4: In addition, how does the data collection from EOL/Enron=20 Networks flow to the risk management groups? How is the information used? EnronOnline transactions are sent to different risk management groups=20 depending on the type of commodity transacted. For example, the group that= =20 handles U.S. gas settlements is not the same group as the one handling=20 Australian Power. The transactions are transmitted to the appropriate back= =20 office utilizing a =01&bridge=018: a process that is capable of communicat= ing=20 transaction information into the variety of systems that Enron operates. Th= e=20 potential for manual input error is thereby removed providing Enron and the= =20 customer with more efficient recording of the transaction. The back office= =20 systems at Enron use transaction information as an input into various=20 functions, such as invoicing, preparation of financial statements, risk=20 management and credit. These back office systems are used to track=20 transactions from all sources, including EnronOnline, the telephone, other= =20 trading systems, etc. Information is maintained on these systems according= =20 to accounting and regulatory rules, regardless of the source of the=20 transaction. The Enron commercial employee, who is offering to buy or to sell through=20 EnronOnline, does so through a price management software application, this= =20 notifies him immediately that a transaction is completed. The counterparty= ,=20 the Enron commercial employee and the risk management groups are all notifi= ed=20 by the system at the same time. =20 The data from an EnronOnline transaction is used in exactly the same way as= =20 information is used from any transaction completed by Enron. When a=20 transaction is completed, EnronOnline serves purely as a deal capture syste= m=20 that captures the data necessary to feed to our risk management system. =20 Enron Online does not feed settlement systems or credit systems. It does,= =20 however, automate our deal capture system, which improves the data feeds to= =20 our settlement and credit systems. Question 5: Also, we assume that data regarding each trade is maintained by= =20 EOL. If yes, in what form and for how long? EnronOnline transactions are captured in the EnronOnline database. The=20 transactions are 'bridged' (duplicated) onto the various systems (databases= )=20 managing the underlying commodity (the risk system associated with the=20 commodity). We currently intend to store the data for a period of six year= s=20 post a transaction completing (for example, deliveries finishing) and this = is=20 policy across all databases. In general, EnronOnline is an electronic trading platform that offers free,= =20 real-time pricing information for approximately 1,800 products for 13=20 commodities, including electricity and natural gas. EnronOnline utilizes= =20 e-commerce and Internet technology to conduct trading business that=20 previously took place on the telephone and by fax. EnronOnline is a=20 proprietary, or =01&one-to-many=018 trading platform. On a =01&one-to-many= =018 platform,=20 one entity, such as Enron, is the principal to every trade (unlike a =01&br= oker=018=20 type platform). =20 EnronOnline allows buyers and sellers to act on prices that can change by t= he=20 second. Buyers or sellers can also see real-time price spreads of both the= =20 sell price and the buy price. For example, on the telephone, a buyer=20 previously would call to ask about gas prices for each of the next six=20 months, but by the time the trader finished reciting the prices, some price= s=20 could have changed. EnronOnline allows counterparties to see the =01+bid a= nd=20 offer prices=018 all the time to make more informed decisions. The energy products offered on EnronOnline are subject to federal oversight= =20 as follows: The Commodity Futures Trading Commission (=01&CFTC=018) has= =20 enforcement authority over physical transactions on EnronOnline to police f= or=20 potential manipulation. The Federal Energy Regulatory Commission has=20 regulatory authority over physical natural gas and electricity sales for=20 resale. =20 The CFTC has anti-fraud and anti-manipulation enforcement jurisdiction over= =20 financially settled derivatives (swaps and options). Moreover, pursuant to= =20 the Commodity Exchange Act (=01&CEA=018), Enron can only trade derivatives = with=20 counterparties that qualify as sophisticated according to such rules. Such= =20 transactions are permitted as long as both parties are Eligible Contract=20 Participants (=01&ECPs=018)(generally, corporations, partnerships and other= =20 entities that meet net worth or asset tests). =20 EnronOnline is a proprietary, bilateral trading platform on which Enron is = a=20 principal to every trade. As such, EnronOnline is not a =01&trading facili= ty=018=20 as defined under the CFMA. As a proprietary platform, EnronOnline uses=20 Internet technology to provide another method of communication between Enro= n=20 and its customers. =20 From: Lisa Yoho@ENRON on 06/22/2001 12:14 PM To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Linda=20 Robertson/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, Greg=20 Whalley/Enron@EnronXGate, John J Lavorato/Enron@EnronXGate, Louise=20 Kitchen/HOU/ECT@ECT, David Forster/Enron@EnronXGate, William S=20 Bradford/Enron@EnronXGate, James D Steffes/NA/Enron@Enron, Elizabeth=20 Sager/Enron@EnronXGate, Jeffrey T Hodge/Enron@EnronXGate, Mark E=20 Haedicke/Enron@EnronXGate, Mark Taylor/Enron@EnronXGate, Tom=20 Briggs/NA/Enron@Enron, Chris Long/Corp/Enron@ENRON, Bob Butts/Enron@EnronXG= ate cc: =20 Subject: Draft Responses to FERC Staff Attached are draft responses to FERC staff's questions relating to EOL rais= ed=20 during and after their visit to Enron. Please provide comments to Lisa Yo= ho=20 (x53837) or Christi Nicolay (x37007) by COB on Monday, June 25th. =20 Thanks! Christi and Lisa
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