Meeting with Com Ed

On Friday, July 6th, we had an excellent first meeting with Com Ed.=20

In attendence from Enron were Rogers Herndon, Marc Ulrich, Jeff Merola, Bra=
d Snyder, Guy Sharfman and myself. (Roy Boston and our attorney Chris Town=
send attended our pre-meeting discussion but did not attend at ComEd to kee=
p our numbers down).

In attendence from Com Ed were Pam Strobel President, Exelon Energy Deliver=
y Company and Vice Chair, ComEd; Frank Clark, Ex. V.P. Customer Marketing a=
nd Energy Delivery Services, ComEd; Gerald Rhodes, President, Exelon Energy=
; Arlene Juracek, Vice President, Regulatory & Strategic Services, ComEd; J=
ohn McCawley, Director, Electric and Gas Choice; and Michael Freeman, Long-=
Term Trader, Exelon Power Team.

During the course of the meeting, we delivered our message that we, like Co=
mEd, wanted to see a competitive market emerge in Illinois, but that we had=
concern that lifting the PPO early without the presence of a competitive m=
arket could create a California-like situation - which is what they were st=
riving to avoid - because their approach would leave buyers on the competit=
ive market without having any sellers due to problems with physical deliver=
y. We indicated our concern for our existing customers and our ability to =
grow our business in Illinois. We stressed the PJM model as a workable sol=
ution that creates a liquid market. There was much enthusiasm on the part =
of ComEd for focusing ICC attention on creating that kind of a solution for=
Illinois. Arlene Juracek encouraged us to work with them on this and to m=
eet with Steve Nauman and Celia David. Since Mike Roan and I will be in Il=
linois on this Tuesday and Wednesday, first to hear the Alliance's presenta=
tion to the ICC and then for Mike to make a presentation the following day,=
we are going to try and meet with them.

One of our objectives was to set up a team between Enron and ComEd to go th=
rough the requirements and nuts and bolts of physical delivery into Illinoi=
s. This was accomplished and Jeff Merola and Mark Ulrich witll be meeting =
with Ann McGlin at ComEd to get a better understanding of what we can and =
cannot do to achieve physical delivery. Also, Michael Freeman indicated a =
willingness to sell us a structured retail product to help us achieve physi=
cal delivery (energy and/or load following services), and made it clear tha=
t whatever deal we do with the Exelon Power team would be independent and s=
eparate from any deal we might do with ComEd on the PPO front. Once we hav=
e completed our discussions with Ann McGlin and with Michael Freeman, we wi=
ll meet again with ComEd to negotiate what we need for physical delivery. =
=20

We also discussed other aspects of the ComEd letter to the ICC and received=
the following clarifications. Customers going off the PPO before 2004 wou=
ld be offered rate 6L which is a bundled rate. After 2004, ComEd plans to =
go to real time pricing on a day ahead or hourly basis. As to whether the =
CTC could be reinstated after a customer was dropped from PPO, they indicat=
ed that they had not thought about it, but believed the law would allow thi=
s. Arlene Juracek, however, commented that they could lock in a CTC agreem=
ent with a customer. I interpret that to mean that as part of an agreement=
to support ComEd in its proposal, we may be able to guarantee that for our=
customers, the CTC will not reemerge if market prices go down or that we c=
an negotiate a limited CTC, etc. =20

We also pointed out that we had other concerns like ComEd's unwillingness t=
o negotiate the Supplier Agreement. Not much time was spent on that but my=
sense is that if this is an obstacle to getting our concurrence, we may be=
able to work through this as well.

Frank Clark asked us about our willingness to take on the role of supplier =
of last resort and we responded that we needed first to be sure that we cou=
ld physically deliver to customers. Once that hurdle is addressed, we woul=
d be willing to consider that possibility.

The ComEd negotiating team will meet in Houston on either the morning of Ju=
ly 16th or 17th when we believe the tasks with ComEd will be completed, in =
order to evaluate what we have learned and what our next steps should be. =
I will then arrange a follow-up meeting with Pam Strobel and her team. =20

Janine