Word on the Street -- Reliant Was Setup

The feeling on the street is that Reliant was setup with the $1900 sale. The
word is that the bid for $1900 power had been sitting there for months and
that Reliant had an "understanding" with DWR and the ISO that the bid was not
supposed to be taken except in dire need -- it's for a peaker and the price
represents the opportunity cost of running it now, and using up its very
limited emission credits, rather than running it during the real peak times
this summer. The $1900 represents the estimated cost to Reliant of Reliant
having to buy power this summer on the market when it otherwise would have
had its peaker available. The wors is that the state/ISO took the bid, when
there was not dire need, just to make Reliant look evil and point to ever
higher prices -- when? -- yes, the week before the Bush plan was to come out.

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854

"Ronald Carroll" <rcarroll@bracepatt.com<
05/18/2001 07:16 AM

To: <gfergus@brobeck.com<, <mmilner@coral-energy.com<,
<rreilley@coral-energy.com<, <acomnes@enron.com<, <dfulton@enron.com<,
<jsteffe@enron.com<, <rshapiro@enron.com<, <smara@enron.com<,
<snovose@enron.com<, <jalexander@gibbs-bruns.com<, <sbishop@gibbs-bruns.com<,
<gackerman@wptf.org<
cc:
Subject: Fwd: Reliant's Reaction To Being Singled Out By Governor Davis

----- Message from "Tracey Bradley" <tbradley@bracepatt.com< on Fri, 18 May
2001 08:12:38 -0500 -----
To: "Justin Long" <jlong@bracepatt.com<, "Paul Fox" <pfox@bracepatt.com<
cc: "Ronald Carroll" <rcarroll@bracepatt.com<
Subject: Reliant's Reaction To Being Singled Out By Governor Davis
May 17, 7:52 pm Eastern Time

Press Release

Reliant Energy Urges Governor Davis to Trade Political Fingerpointing for
Solutions

HOUSTON--(BUSINESS WIRE)--May 17, 2001--Reliant Energy strongly disagrees
with California Governor Gray Davis' recent characterization of the company
as being ``obstructionist'' and opposing court orders.

Reliant Energy believes that these accusations are politically motivated
attempts to demonize Reliant Energy as an outsider responsible for causing
the state's energy crisis. The accusations are simply not based on fact. More
importantly, the governor's attacks have done nothing to increase the state's
supply of electricity or prevent the blackouts expected this summer. If
anything, the comments have fostered an atmosphere of distrust and
uncertainty that have further destabilized the market.

``Reliant hopes the governor and others will stop these baseless accusations
and focus on true solutions to California's energy shortage,'' said Joe Bob
Perkins, president and chief operating officer, Reliant Energy Wholesale
Group. ``We are now being singled out because we believe in an open market,
not government control of power generation, and we have offered solutions
that do not jibe with the governor's political agenda. Contrary to the
perception Governor Davis is attempting to promote, we have been focused on
providing solutions that are fair to all parties in California since the
outset of this crisis. In fact, earlier this week we provided the governor's
office with an outline of a series of emergency measures that, if pursued
quickly, could help mitigate the power crisis this summer. We are still
waiting on a response.''

Perkins pointed out many of the steps Reliant Energy has taken to keep the
lights on in California, disputing the accusation of being
``obstructionist'':

Reliant Energy has run its 30-to-50-year-old plants at the highest levels
since their purchase in 1998. In 2000, Reliant nearly doubled the output from
these plants to meet the needs of Californians -- running them at levels far
exceeding the prior owner, Southern California Edison.

Reliant Energy invested $80 million dollars in 2000 alone to upgrade plants
to make sure the most power possible is available during peak times. In
addition, the company improved emissions levels to clean up the environment
and keep costs for emission credits to a minimum.

For the last two years, Reliant has encouraged the Investor Owned Utilities
and the state to invest in long-term contracts to stabilize rates instead of
relying on the spot market. In particular, Reliant Energy offered to sell
power at two cents per kilowatt-hour if the buyer would purchase the natural
gas required to generate the power, ensuring a transparent cost of power.

Reliant Energy has never shut down generation despite the prevalent concerns
that continue to exist over credit issues. In contrast, just last week a
major out-of-state supplier refused to continue to sell to California unless
payment was forthcoming.

Reliant Energy has created an aggressive curtailment plan to encourage
businesses to ``sell back'' power voluntarily to add more power to the
Western power grid. The company has met with many leaders in Western states
to introduce the program, yet California officials will not even engage in a
dialogue on the program.

``We welcome the opportunity to discuss these issues one-on-one with the
governor,'' Perkins said. ``Unfortunately, he has repeatedly refused this
request over the past year. Last week's meeting with generators was the first
time the group was allowed to speak with him directly, and obviously the
purpose of that meeting was political grandstanding.''

Perkins added that the governor's accusations of opposing court orders are
unfounded. ``We have always worked within the law and are proud of our
commitment to keeping the lights on. We have followed all court orders and
worked closely with the FERC and others to cooperate fully with all
investigations. When necessary, we have filed court challenges to orders that
we believe violate our rights -- hardly an illegal action.''

To participate in a telephone press conference tomorrow, Friday May 18 at 11
a.m. PDT, contact Maxine Enciso at 310/444-1303 or Richard Wheatley at
713/207-5881.

------------------------------------------------------------------------------
--
Contact:

For Reliant Energy
Los Angeles: Maxine Enciso, 310/444-1303
Media: Richard Wheatley, 713/207-5881