Government Affairs – Value Created 2000

1. Government Affairs – Value Created 2000

2. Valuation Methodology • Difficult to quantify every activity undertaken by Public Affairs (in fact, much of what we do shouldn’t be quantified because “conclusions” may miss the point) • Ensures that Public Affairs continues to generate more value than actual expense • Process drives Public Affairs’ staff to view themselves as “originators” creating bottom-line value for Enron • revenue enhancement (new opportunity, market expansion) • cost reduction (fee delay, rate decrease) • Calculation process focuses on the following rules – • simplicity, • consistency, • objectivity, • reasonableness, • equity

3. Value Created – Hard Alberta Power Purchase Agreement Auction $45,000,000 BLM / US Forest Service ROW Fee Delay $44,500,000 TNPC Private Placement (EGA Service Contract) $30,000,000 California Green Credit Legislation $25,000,000 California 1998 Revenue Adjustment Proceeding $15,000,000 Termoflores ????? $10,000,000 Payment of Trakya Fuel Expense Arrearage $5,000,000 Vitro Power Plant Permit Extension $3,000,000 Italy Electricity Capacity Allocation Process $2,000,000 Maine Electricity Consumers Cooperative $1,250,000 ------------------- Total $180,750,000

4. Value Created – Soft Oversaw EcoElectrica EPA Compliance efforts Received OPUC Approvals for Coyote Springs Reformed Cinergy Wholesale Electricity Scheduling Practices Delayed implementation of California ISO Price Cap Reductions Managed CEC Review of EES Green Product Reporting Error Ensured EBS Trading avoided Universal Service Fees Coordinated 2000 Peaker Plant Interconnection Agreements Supported EES “Quick Entry” into SDG&E Completed Arcos Gas Transportation Agreement Structured NYISO Transmission Congestion Contract Auction Process Received Approvals for Sutton Bridge Divestiture

5. Value Created - Intangibles Ohio Retail Access Settlements (7 Utilities) WWF Cuiaba Funding Corporate Responsibility Program Friends of the Earth Shareholder Vote Cal PX Investigation of Silver Peak Line Scheduling Fortune Magazine – “Ten Who Get It”

6. Regulatory Risk Management – Gross Exposure United Illuminating ICAP Obligation $168,750,000 1999 Peaker Emissions Limitations $200,000,000 Puerto Suarez Brazilian Electricity Import Permit $150,000,000 Transredes Deferred Account $100,000,000 Cuiaba Bolivian Natural Gas Export Permit $91,000,000 Dabhol - MSEB Merit Order Dispatch $50,000,000 Elektro EBIDTA Recovery $50,000,000 Transwestern Hector Road Receipt Point $41,600,000 Transredes Administrative Rule 411/99 + 412/99 $21,600,000 Pan-European Electricity Export Fee $20,000,000 ------------------- Total $892,950,000

7. Public Affairs – Pushing the Message Forward

8. Background • The restructuring of the electric and natural gas industry to promote competition and customer choice is now facing serious questions given the current California “crisis” • No state has moved away from previous competition decisions, although some states are slowing their movement toward competition • Public Affairs is responding by defending competition and by trying to seize the crisis mentality to “finish the job” on restructuring • Our key goals include – • Have FERC finish unbundling the electric transmission network • Have state regulators implement market-driven solutions for utilities to manage energy price volatility • Minimize any potential bottom-line impacts to Enron from ongoing investigations

9. Key Strategies Spread the competition “virus” Project Bluegrass Fix the Problem, Not the Blame

10. Key Strategies • Spread the competition “virus” • Develop arsenal of business, industry and academic parties that can “push the competition message” within their circles of influence • Seek to find parties that will help Enron with this fight • co-author Op-Ed articles • mention crisis in their speeches • co-author letters to FERC and Congress • agree to take media referrals • Create “truth squad” to communicate to key policy makers • what really happened in California this summer • the upcoming winter natural gas price crunch

11. Key Strategies • Project Bluegrass • Very short term opportunity to have FERC take decisive action to remedy market dislocations with true reform. • Political will does not currently exist to take such action, although current discussions seem to indicate that a small opportunity exists. • Working the Democratic leadership to convince FERC that action now is in the best interest of Vice President Gore. • Three Democrats to One Republican on FERC. Commissioner Breathitt is the swing vote on the FERC. • Multiple avenues before FERC today to implement our actions • Keep Congress from taking any partial action on reliability or industry reform • Our goal is to provide “air cover” for FERC to finish the job on transmission access

12. Key Strategies • Fix the problem, not the blame • There are numerous investigations of the price spikes in California (California PUC, California EOB, Cal PX, Cal ISO, FERC, California AG, California Auditor General, GAO, etc.) • Current “witch hunt” in California focused on paying for the deferral and utility undercollection • Our focus in on managing the downside of these investigations to ensure that Enron is not “fingered” or penalized

13. Key Strategies • Public Affairs needs assistance from Office of the Chair • Enron leadership must help with discussing these options with industry and other leadership • We have a list of who to call and the right messages, but we don’t have the contacts • The virus begins with you!