2/2/98

Perot Systems Corporation      CONFIDENTIAL        Policy Assessment Corporation

                         PROJECT TASKS AND DELIVERABLES


The project phases are designed as self-contained tasks whose completion
verifies that step of the project.

1. Phase I:
*  Determine the real-time optimization opportunities in California. The focus
   will primarily be on electricity trading, but gas trading will be included if
   appropriate. Trading strategy will be developed for both physical and
   non-physical assets. Real- time efforts (moves) can include extended periods
   strategies.
*  Use existing software tools and convert the moves to operationally reflect
   the detailed California PX/ISO specifications and protocols. Select the
   subset of moves that corresponds to the way Enron would like to do business.
2. Phase II: incorporate the data streams that will be available from the
   California PX/ISO and other market participants as soon as they are known and
   verify that the system performs well under the expected and unexpected
   operational conditions of the California PX/ISO.
3. Phase III: fine tune the model parameters as soon as actual California PX/ISO
   data support such adjustments. Further, provide support to Enron staff during
   system start- up , and thereafter as needed, to ensure maximum profitability
   from the system.
4. Phase IV: repeat tasks listed in Phases I-RI for WSCC or other locales (These
   tasks could be started in parallel with the PX/ISO tasks.)

For all phases, great effort would be made to keep Enron staff fully cognizant
of the model's technology and operation.

PSC/PAC do not claim to have expertise in all aspects of electricity trading.
The intent of this proposal is to complement Enron's existing electricity
trading team with a real-time market-responsive software system and PSC/PAC
consulting to significantly enhance the overall value for Enron. The focus is on
formalizing the processes to limit the impacts of constraints and to leverage
the opportunities available within the rules of a transitional marketplace.

                                  Phase I Tasks

                                       Tasks
1.) Review PX and ISO protocols and business opportunities: This task involves a
    detailed review of PX and ISO business and operational protocols and
    particularly the interactions between these two entities. The main goal is
    to become well versed with the ongoing changes in PX and ISO business and
    operational protocols, and to become aware of which strategies are available
    to competitiors in the California market.

Deliverable: The strategies will be documented.

2.)Implement the reduced scale PX/ISO operational model (CPXISO): This task
   implements a reduced scale model that would closely approximate the operation
   of California's PX and ISO systems. This task starts with existing full scale
   models available to PSC and PAC. Included in this model will be the PX's
   energy auction model, the ISO Congestion Management model, and the
   interaction between these models. The full 6000 bus ISO linear programming
   model will be simulated using a much smaller set of buses and nodes
   (approximately 100 buses). This ISO model, even though it will be much
   smaller, will be much faster and will effectively simulate the results of the
   actual ISO simulation and dispatch. Data interfaces between PX, ISO, and the
   deregulation model (CIGMOD) will also be developed. Data models for external
   systems will also be developed in this task.

Deliverable: A working version of the CPXISO system.

3.) Incorporate strategies into system: Based on Task 1, the full spectrum of
  strategies will be developed for each of the participants in the market. This
  task will emphasize getting the "levers" into the model to allow for the
  development of ever more sophisticated strategies. The full range of
  strategies will be linked to the HYPERSENS subsystem and thereby allow the
  exhaustive testing and selection of strategy portfolios under uncertain future
  conditions.

Deliverable: Working HYPERSENS subsystem with implemented strategy levers.

4.) Adapt PAC's short-term load forecast (SLF) model to work for California's
   energy market: This task involves integrating and fine tuning the SLF model
   for California competitors and developing interfaces with the PX/ISO
   operational model. The system will forecast hourly demands for all players in
   and out of California. The SLF model produces hourly load forecasts for the
   next 7 days based on the historical loads, the historical weather, and the
   weather forecast. It re- estimates the relevant coefficients on a daily or
   hourly basis by live links to the weather service and existing conditions.

Deliverable: Existing system with SLF integration.

5.) Develop interfaces between CIGMOD and CPXISO: The system interface
   includes system-control, Enron data-entry, and Enron bidding strategy output.
   The interface between the model and the operators will automate the input of
   hourly data, will produce timely reports and charts which effectively
   communicate the relevant information, and will facilitate the operator's
   decision making process.

Deliverable: Existing System site tested interface.

6.) Add Enron Proprietary Data: Any proprietary data that Enron would like
included can be added at this time. From this point forward, the databases of
the model cannot be removed from Enron offices without written permission.

7.) Calibrate CIGMOD/CPXISO model to California and Enron behavior: Data for
each company and plant in the region will be incorporated into the model. This
data will be available for use in determining bidding and market-placement
strategies (prices and quantities) and will be used to determine the operating
income of Enron and each of its competitors. The data will include capacities,
heat rates, fuel prices, variable and fixed O&M, and embedded capital costs. The
CIGMOD model will be calibrated to competitor and Enron data. The calibration
process will test the model and will estimate critical operating and financial
parameters.

Deliverable: Existing model with tested simulation of all relevant companies.

8.) Test model with Enron staff and update algorithms/interface: This task will
test the operation on the model to insure that the simulation of the ISO, PX,
and company financials are accurate and that the interface is informative and
easy to use. Strategies will be tested to insure that they are simulated
correctly and that the results are reasonable. The algorithms and interface will
be revised and enhanced as necessary.

Deliverable: Staff training and system with enhanced interface

9.) Test model and strategies against realistic conditions: The system will be
used to test the basic strategies to determine the realistic impact of these
strategies. The growing list of strategies will be tested in several sets of
simulations. These simulations will test human strategy against human strategy
and human strategy against machine strategy to determine the effectiveness of
the strategies and to develop alternative strategies. As good strategies are
developed, counter strategies will be developed, incorporated and tested for
their robustness. The creativity of the human players will be very important in
developing new strategies. After a new strategy is developed it will be
automated and utilized by computer players.

Deliverable: Fully functional system except for real-time PX/ISO analysis.

CIGMOD and associated software: Deliverable: At the beginning of the project,
the CIGMOD system will be implemented on the Enron computer system for this
project.

                                  Phase II Tasks

                                       Tasks

Integration of California's market data into CIGMOD/CPXISO model: This task will
determine the availability of the data from the PX and the ISO. The assessment
will include the timing of the data, the company and node detail of the data,
and the form and source of the data. Any expected or possible problems or
inconsistencies of the data will be noted and solutions proposed. Interfaces to
allow the rapid inclusion of changing protocols/conditions will be included.
Implement Al/statistical code into CIGMOD/CPXISO model:. The data stream will be
analyzed to determine its use in the forecasting of competitor actions, spot
market prices, and other system values. As data allow, the system will be
modified to automatically analyze the data using accepted statistical and
artificial intelligence methods.

Interface to real-time systems: . A real-time data retrieval system will be
developed to bring in the data from the PX, the ISO, and other relevant data
sources. Because Perot intimately knows the system, this task will provide Enron
with the best understanding of the data available.

Develop portfolio rules: Portfolio rules for real-time and over-all strategies
will be developed by testing each strategy under a variety of market conditions
and competitor strategies. Portfolios as used here are defined as the
time-dependent packages of bids and demands/supply that maximize Enron goals.
Initial testing and training of Enron staff: This task will test the operation
of the system by creating a synthetic hour-by-hour data stream. Enron staff will
conduct the test after being trained on the use of the system. The results of
the test will be used to revise and enhance the system.

Market dry runs: The proposed strategies and portfolio rules will be tested in
real-time to determine realistic use of strategies and the operation of the
system. Multiple sample data streams will be developed to test all aspects of
the system. The decision making process of the competitors will be split between
human players and computerized decision rules. This test will be used to further
enhance the strategies and counter strategies for Enron in the California
market.

                                Phase III Tasks

                                      Tasks

Monitor early use and fine tuning of market strategies and addition of new Al
based strategies: During the first days of the deregulation, large amounts of
new information will become available. This information will be used to
immediately improve the performance of the system. The task will determine and
update any simulation sub-systems needing tuning or enhancement. This task will
also test and refime the fail-safe algorithm for bidding under unlikely
conditions where the system warns users of an ambiguous situation.

Develop benchmark saving protocols and models: To determine the efficacy of the
system, it needs to be benchmarked against "reference" conditions. This task
will provide a secondary simulation that has the market acting according to
assumed economic considerations such as marginal costs pricing or the existing
trends in the market. A continuous accounting record of wins and losses will be
maintained in the system.

Ongoing support Enron staff: The PX/ISO protocols and rules will probably change
regularly in the early period of deregulation. Further, new commission rulings
must be expected. This task provides Enron staff assistance in updating the
systems and its data bases to reflect new conditions. Further, it provides
assistance in strategy development when the new rules change the nature of the
market operation.