Subject: proposed changes to business practices based on the california
energy crisis
over the past several months , we have reviewed in detail our trading contracts and the companies through which we conduct our trading business in california . in order to reduce enron ' s non - market risks ( e . g . legal , credit and regulatory ) in the volatile commodity markets in california or any " future california " , we propose the following changes :
1 . mandatory uniform set - off provisions in all trading contracts for all commodities - - set - off language varies commodity by commodity in trading contracts . set - off is one of the most critical tools available to enron in a major default situation and it is critical to have set - off language and to have it be uniform commodity to commodity so that enron can get the best advantage from set - off and not just the least common denominator .
2 . master netting agreements for appropriate counterparties with multiple masters with significant opposite exposures - - where it is necessary to have multiple masters with a counterparty , a " bridge " should be put in place between the masters whenever there is significant opposite exposures under the two or more masters .
3 . merge epmi into ena - - power trades are done through epmi . merging epmi into ena and conducting power trades through ena is much more efficient from both a credit and legal point of view .
4 . no automatic termination for a bankruptcy event - - in the pge / sce situation , it should be the non - defaulting party ' s ( enron in this case ) option to terminate rather than an automatic termination on " inability to pay debts as they become due " .
let me know if you have any other proposed changes to our trading contracts or entities through which we conduct our trading . i believe these changes will ( i ) improve efficiency , ( ii ) reduce risks , ( iii ) develop the opportunity to do more business with certain counterparties and ( iv ) substantially improve enron ' s position in the next california type market . the long range goal is to conduct as much as possible of the trading business through a single entity and a single or limited number of standardized agreements .