Subject: Retail Competition In Texas - Internal Communication

INTERNAL COMMUNICATION REGARDING DELAYS  IN RETAIL COMPETITION IN TEXAS October 29, 2001  The main purpose of this memo is to inform EPMI and EES commercial teams regarding the implementation status of retail competition Texas, particularly in non-ERCOT regions, which  include parts of the areas served by the following utilities:  ?
Southwestern Electric Power Company (SWEPCO) and West Texas Utilities Company (WTU) - both in the SPP region ?
Entergy Gulf States (EGSI) - in the Energy-SERC region  As most of you probably have heard, the Texas Utility Commission has been examining, in the last few weeks, the readiness to implement retail competition in those areas.
The Public Utility Commission of Texas (Staff) has filed petitions seeking a determination of whether market institutions are ready for retail competition in above areas, to start January 01, 2002.
There is a concern among the Commission and many other participants that non-ERCOT-Texas regions are not ready for competition.
This concern has two major causes: -	Lack of a vibrant, efficient wholesale market in those regions, where newly established REPs could have full access to others suppliers, on a non-discriminatory basis -	      Lack of success in the retail pilot programs developed in 2001 - no alternative suppliers and no customer shifting at all; a recent hearing has confirmed most REPs absolute lack of interest in those regions - at least for the time being  SPP  Last Week, the Public Utility Commission decided to delay competition in SPP Texas.
Or, more accurately, "to delay customer choice", in the Commission preferred language.
Enron, who was requested to file a testimony, opposed to any delays, under the argument that SPP is not a "perfect market", but REPs could trade in this market as other marketers do.
No final dates have been established yet.
However, one estimates that the delay may vary from 12 to 18 months.
The Commission has established some clear actions and milestones before retail competition is implemented: -	Support SPP to begin wholesale market operations, which involves refinements and upgrades in a few of existing systems, such as settlement; -	      Reform in SPP Tariffs and implementation of a market based congestion management; -	      Continue the pilot, attract new competitors and open the market.
As part of this effort, the Commission created a Southwest Power Pool Market Readiness Implementation Project (Docket # 24869) to develop the necessary steps to transition to full competition, identify milestones, monitor progress and report to the Commission on a regular basis.
Enron will be supporting this effort.
SERC  SERC regions bear resemblance with SPP, in terms of Commission's intent to delay competition.
The most important difference is that the incumbent utility, EGSI, an Entergy subsidiary, has strongly supported timely implementation.
The Commission fears that Entergy will benefit from its "monopolistic"  position in the region, in the absence of other REPs.  No final decisions have been made yet.
Entergy Gulf States, in conjunction with the Commission Staff and other interested parties have gone through a settlement process, whereby retail competition will be delayed until September 15, 2002.
The subject is still being examined by the Commission and no final decisions have been made.
However, we expect the Commission to approve the Settlement Agreement, therefore delaying competition until September 15, 2002.
ERCOT  All the discussion about delays in competition focuses on non-ERCOT Texas only.
There are rumors and ongoing discussions about delaying competition in ERCOT-Texas, which is scheduled to take place on  January 01, 2002.
For example, Nancy Hetrich from Enron, will be attending the Legislative Oversight Committee on Friday, November 02.
She will be appearing in her capacity of Chair of RMS Sub-Committee.
Contrary to non-ERCOT, there is a strong support from  most industry participants to have retail competition on time.
Besides, the results from the pilots were successful and ERCOT is supposed to provide vibrant wholesale competition.
Therefore, unlike SPP and Entergy, there should be no material reasons or fears to delay retail competition in ERCOT-Texas.
We will keep you apprised as things evolve.