Subject: NA Gas and Power Limits
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
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Date: Tue, 13 Feb 2001 09:05:00 -0800 (PST)

The Enron BOD approved the some limit changes today, effective for trading 
day Tuesday, February 13, 2001, consistent with the risk management policy's 
intent to provide a trading limit framework whereby management can review 
Enron's consolidated exposure to commodities.  To faciliate the aggregation 
and reporting of Enron's consolidated exposure to commodities, the limit 
structure was modified to provide for aggregation of North American Natural 
Gas and Electricity, with EES's NA Gas and Power positions included, and with 
a separate business unit sub-limit for EES.

Policy amendments were as follows:

u Clarify the cross-commodity trading policy to specify that trading limits 
are to be applied against Enron,s consolidated commodity positions on an 
individual commodity group basis;  Enron,s consolidated Daily Position Report 
should provide required market risk disclosures by primary commodity group; 
(for example, Enron,s exposure to the North American Natural Gas market shall 
be aggregated across the company).

) Delegate cross-commodity trading approval among established commodity 
groups to the respective Business Units Offices of the Chairman, with 
appropriate reporting to the Enron Corp. Chief Risk Officer.

u Specify the operational control requirement that all trades executed over 
the telephone must be recorded electronically.

Cross-commodity trading authority was not automatically pre-approved for 
anyone in the company. Authority to trade a commodity for which you are not 
the authorized trader must be obtained from the Business Unit Office of the 
Chairman for the commodity group that is authorized to trade that commodity, 
with appropriate reporting as noted below.  

  North American Cross-Commodity  Limits    
VaR Limit     None (terminated the $5MM VaR limit)

North American Natural Gas
Net Open Position    500 Bcf
Maturity / Gap Risk Limit   200 Bcf
VaR Limit     $61 MM (EES - $1 MM) **

North American Electricity
Net Open Position    90 Twh
Maturity / Gap Risk Limit   25 Twh
VaR Limit     $54 MM (EES - $4 MM) **

** EES's $5MM VaR was allocated between Gas and Power for purposes of 
calculating consolidated NA Gas and Power limits.  From a business unit 
perspective, the $5MM VaR limit will continue to be monitored for EES in 
total.

Below are relevant excerpts from the revised policy addressing the 
cross-commodity trading guidelines.  I will distribute the entire updated 
policy as soon as we incorporate the BOD's comments.

V. Operations and Controls.
B.  Position Reporting.  "...For purposes of limit monitoring and aggregation 
of Enron,s consolidated trading results, Enron,s consolidated Daily Position 
Report should include the Net Open Position, Maturity/Gap Position, profit or 
loss, and potential exposure (VaR) for approved Commodity Groups consolidated 
across the company without regard to which business unit undertook the 
trading activity. In those instances where limits are granted to a business 
unit for a basket of commodities, reporting for individual commodity risk 
books shall be maintained to facilitate aggregation of Enron,s actual 
consolidated commodity specific exposure.  Management reporting may 
separately provide business unit sub-limit monitoring and trading results 
aggregated according to management lines."

E. Transaction Approval and Execution. "Only those employees designated by 
the Enron Corp. Chief Risk Officer or his designee(s) will be authorized to 
enter into Transactions on behalf of Enron.  The Chief Risk Officer must also 
maintain a record of those employees responsible for the individual Commodity 
Groups (Commodity Group Manager) as specified in the Appendices.  Individuals 
will be assigned as commodity leaders to manage Enron,s aggregate position 
across the company as determined necessary by the Chief Risk Officer..."

VI.  Policy Amendment Authority
B. Cross-Commodity Position Authorization.  If in the ordinary course of its 
business an Enron Business Unit or trading desk incurs an exposure to an 
underlying commodity or financial instrument for which it does not have 
explicit authority to carry, this exposure should be hedged internally with 
the appropriate Enron desk(s), with appropriate notification to the Chief 
Risk Officer or his designee(s).  Hedge positions should be in instruments 
that have an observable correlation with the underlying exposure, and should 
be rebalanced regularly to substantially neutralize the underlying exposure.  

 Upon notification to the Chief Risk Officer or his designee(s), the Enron 
Business Unit Office of the Chairman who has authority for that commodity 
group may authorize a specific trader in a different commodity group to take 
speculative positions with other Enron trading desks in commodities and/or 
financial instruments other than those which that trader has explicit 
authority to trade (i.e. the Business Unit Office of the Chairman for North 
American Natural Gas may authorize a trader in the Coal group to trade gas 
with the North American Natural Gas desk).    For limit monitoring purposes 
of Enron,s consolidated trading results, these cross-commodity positions 
shall be captured by individual commodity to facilitate aggregation and 
reporting of Enron,s consolidated exposure by commodity in the Daily Position 
Report (Coal desk,s gas position will be aggregated with the North American 
Natural Gas commodity group.)

If you have any questions, feel free to call Vlady at x36954, me at x30429, 
or David Port at x39823.

Regards,

Cassandra Schultz.