Subject: Additoinal thoughts re Maine SOS transaction
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Mon, 27 Nov 2000 05:03:00 -0800 (PST)

All:
I haven't heard from Woody yet, but I thought I'd chime in to add something 
to John's excellent summary of the Maine SOS potential deal.

Perhaps the biggest legal risk is that Enron would be subjected to Maine 
rules and regulations on SOS, which could be changed at any time.  During 
phone conversations over the last 2 weeks, we explained to Maine PUC staff 
that, in a wholesale contract, we usually do not retain this risk.  We 
explained the clauses in the UI deal (anonymously, of course) that (1) 
prohibit UI from advocating change that would adversely affect us and (2) if 
such change occurs anyway, requires UI to negotiate w/ us to restore the 
original economic bargain.  The staff indicated a willingness to have the PUC 
issue its order awarding the SOS contract also say that the PUC would not 
change the rules for the term of that award.  But we don't know how they 
would do that (we might see a draft early this week), and that still doesn't 
really remove the regulatory change risk  -- only a statute could do that, 
and they don't appear to have much of an appetite for that.  

On the damages issues, the contract w/ the T&D company gives Enron no comfort 
at all.  The T&D company has virtually no liability to Enron, nor does anyone 
else.  However, under SOS Rule 301, if Enron defaults, the Maine PUC will 
order the T&D company how to handle finding replacement service and Enron 
would be exposed to the full replacement costs, in spite of the cap on the 
Enron Corp. guarantee.  Effectively, this means that Enron Corp.'s liability 
is capped, but the Enron entity that provides the SOS can potentially be sued 
by the Maine Attorney General for additional amounts needed to pay for the 
additional costs -- or the PUC can approve a rate increase from customers.  
(Sounds like this would be a political decision, eventually.)  The difference 
between this exposure and how we usually handle this issue is that our 
contract usually sets parameters on calculating replacement costs and 
requires commercially reasonable behavior, standards for which are widely 
accepted and ultimately interpreted by commercial arbitrators in a neutral 
forum.  In the Maine situation, if we want to dispute the amounts claimed, 
we'd have to argue about whether commercially reasonable behavior was even 
required, and we'd be doing that in litigation in a Maine court facing the 
Maine Attorney General.  

Please let me know if you'd like any other info or wish to discuss further. 
Regards,
Janice

EB3861
Assistant General Counsel, Enron North America Corp.
713-853-1794 (Fax:  713-646-4842)

	John Llodra@ENRON
	11/27/2000 09:23 AM
		 
		 To: Janet R Dietrich/HOU/ECT@ECT
		 cc: George Wood/Corp/Enron@Enron, Janice R Moore/HOU/ECT@ECT, Jeffery 
Ader/HOU/ECT@ECT, Jim Meyn/NA/Enron@Enron, Pearce W Hammond/Corp/Enron@ENRON
		 Subject: Summary of Maine SOS transaction

Janet:

As promised, here is a brief synopsis of the Maine SOS transaction terms and 
issues.  I am in the office all day and free to discuss if you like.  Woody 
is actually on the way to Houston and is available after about noon central 
time.

Janice Moore (x31794) has worked on the many legal issues and can elaborate 
more fully on the issues there, including the lack of a real contract 
counterparty.  Jim Meyn and Pearce Hammond in structuring can give you more 
details on the load stats, etc in each of the classes for each utility.

I will also forward some old email correspondence I have which discusses the 
various legal issues and bidder qualification requirements, etc.

Please feel free to call to discuss.  (978-449-9936).

Regards,
John