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Enron Mail |
The difficulty is in knowing which entites are regulated and which are not.
For instance, ENA is an "unregulated" affiliate of a regulated utility (PGE). But many utilities have energy services companies affiliates which, while not regulated utilities like San Diego Gas & Electric, are nevertheless heavily regulated. We have tried to figure out what we can in the time available and have relied on readily available public inofrmation. David Forster 10/14/99 08:48 AM To: Mark Taylor/HOU/ECT@ECT cc: Subject: Online Derivatives Trading with Regulated Utilities Mark, Does the legal precedent which we previously discussed, apply to subsidiaries of utilities as well as the utilities themselves? Dave ---------------------- Forwarded by David Forster/LON/ECT on 14/10/99 14:47 --------------------------- Enron Capital & Trade Resources Corp. From: Tana Jones 14/10/99 00:08 To: David Forster/LON/ECT@ECT cc: Louise Kitchen/LON/ECT@ECT, Bob Shults/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT Subject: Online Derivatives Trading with Regulated Utilities As far as your email questions, my responses are following: 1. The list I have provided you is the only list that exists on financial counterparties. There is no Excel spreadsheet to follow. 2. Duke Energy Corporation. At Mark's direction, I am sending his note below regarding utilities. Again, until we do the due diligence on a utility counterparty we have no way of knowing what kind of local, state or federal regulation or approvals they may be subject to. We currently have masters in place with only about 10 utilities/govt's. We are in the process of negotiating another 30. Until those masters are executed and we have the relevant resolutions, authority documents and/or legal opinions, I cannot approve them for online trading. I have made every effort to search company websites and elicit from Credit whether a counterparty is a regulated utility or not. If I cannot tell by the information available to me, additional due diligence will be needed to see if they are subject to local, state, or federal regulation. Mark can override any decision I have made, I can only make decisions within the guidelines the attorneys have set for me. 3. Montana Power Trading and Marketing Company is a subsidiary of a regulated utility. I am unable to determine from Credit or their website what type of regulation they might be subject to. The note is true that Credit says they are getting out of the business anyway. 4. Petrotemex. Per my conversations with Mark and our advice from counsel, unlike U.S. and U.K. counterparties, Mexican counterparties are not able to enter into derivative transactions unless their articles and bylaws specifically provide for these types of transactions. We will not know this until the due diligence is completed, so I am supposed to say "no" for Mexican counterparties we do not have a master swap agreement in place with. 5. PSEG. It is an energy services company; however, it is also not an eligible swap participant (or "ESP"). CFTC regulation limits the derivatives trading we may do to certain types of counterparties that meet certain financial requirements (large, institutional type investors, companies, banks, etc). Corporations and partnerships have to meet certain net worth and asset levels or we cannot trade financially with them. Whenever I say "not ESP" or "not eligible swap participant" it means they have not met the financial net worth test. 6. The American Coal Company. See prior note. ---------------------- Forwarded by Tana Jones/HOU/ECT on 10/13/99 04:21 PM --------------------------- From: Bob Shults 10/12/99 10:15 AM To: Tana Jones/HOU/ECT@ECT cc: Subject: Online Derivatives Trading with Regulated Utilities Does this mean that we have 10 utilities that are approved to trade? What are we doing with the other 30-40? ---------------------- Forwarded by Bob Shults/HOU/ECT on 10/12/99 10:14 AM --------------------------- To: Louise Kitchen/LON/ECT@ECT cc: Tana Jones/HOU/ECT@ECT, Debbie R Brackett/HOU/ECT@ECT, William S Bradford/HOU/ECT@ECT, David Port/LON/ECT@ECT, Bob Shults/HOU/ECT@ECT, David Forster/LON/ECT@ECT, Sara Shackleton/HOU/ECT@ECT Subject: Online Derivatives Trading with Regulated Utilities We have not decided "to prevent any regulated utility from completing any financial transactions" online. If we have already satisfactorily concluded the necessary due diligence with respect to a particular utility, they will be approved. It is only with respect to those utilities which have not yet been researched that we are withholding approval. The due diligence required involves asking the utility for certain information concerning their organization and regulatory situation, hiring local counsel in the relevant state and having research done into the laws and regulations in place there and into any public utility commission orders respecting the particular utility in question, and on occasion requesting an opinion letter from the utility's counsel. We usually begin that process only when a trader believes there is a likelihood of a sufficient volume of trading with the utility to justify the time and expense. FYI, the due diligence process has in the past revealed circumstances which prevented the utility from trading derivatives or required actions to authorize such trading which had not been taken. A recent count showed about 10 executed master agreements and another 30 to 40 in one stage or another of the due diligence/negotiation process. Louise Kitchen 10/06/99 02:46 PM To: Mark E Taylor/HOU/ECT@ECT, Tana Jones/HOU/ECT@ECT cc: Debbie R Brackett/HOU/ECT@ECT, William S Bradford/HOU/ECT@ECT, David Port/LON/ECT@ECT, Bob Shults/HOU/ECT@ECT, David Forster/LON/ECT@ECT Subject: Customer Data On Friday we will be receiving the remaining customer list from credit, due to the timescales I am asking for turnaround on the customer matrix and master agreement review by the end of play Tuesday 12th October. Any problems with this please notify me immediately as we are now running up against very tight deadlines in terms of getting all of the information in the system for the launch schedule. Thanks Louise Mark, On another note we are requesting a review of the blanket decision which has been made to prevent any regulated utility from completing any financial transactions, if we are not prepared to do the due diligence on which ones can transact and which ones can not - is this our responsibility or theirs? ie their decision whether to trade or not. Louise
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