[Federal Register Volume 69, Number 29 (Thursday, February 12, 2004)]
[Notices]
[Pages 7031-7039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-3111]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27799]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

February 6, 2004.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission under provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendment(s) is/are available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by February 27, 2004, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in the case of an attorney at law, 
by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts or law that 
are disputed. A person who so requests will be notified of any hearing, 
if ordered, and will receive a copy of any notice or order issued in 
the matter. After February 27, 2004 the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Enron Corp., et al. (70-10200)

    Enron Corp. (``Enron'' or ``Applicant''), 1400 Smith Street, 
Houston, Texas 77002-7361, a public utility holding company, on its 
behalf and on behalf of its subsidiaries held as of the date of this 
notice, including Portland General Electric Company (``Portland 
General''), 121 Salmon Street, Portland, Oregon 97204 , a public 
utility company (collectively, ``Applicants''),\1\ have filed an 
application-declaration (``Application'') with the Commission under 
sections 6(a), 7, 9(a), 10, 12, 13 of the Act and rules 16, 42-46, 52-
53, 54, 80-87, 90-91 under the Act.
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    \1\ Applicants include both debtor and non-debtor subsidiaries 
of Enron.
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I. Introduction

    Enron is a public utility holding company within the meaning of the 
Act by reason of its ownership of all of the outstanding voting 
securities of Portland General, an Oregon electric public utility 
company. From 1985 through mid-2001, Enron grew from a domestic natural 
gas pipeline company into a large global natural gas and power company. 
Headquartered in Houston, Texas, Enron and its subsidiaries 
historically provided products and services related to natural gas, 
electricity, and communications to wholesale and retail customers. As 
of December 2001, the Enron companies employed approximately 32,000 
individuals worldwide. The Enron companies were principally engaged in 
(a) The marketing of natural gas, electricity and other commodities, 
and

[[Page 7032]]

related risk management and finance services worldwide, (b) the 
delivery and management of energy commodities and capabilities to end-
use retail customers in the industrial and commercial business sectors, 
(c) the generation, transmission, and distribution of electricity to 
markets in the northwestern United States, (d) the transportation of 
natural gas through pipelines to markets throughout the United States, 
and (e) the development, construction, and operation of power plants, 
pipelines, and other energy-related assets worldwide.
    In the last quarter of 2001, the Enron companies lost access to the 
capital markets, both debt and equity, and had insufficient liquidity 
and financial resources to satisfy their current financial obligations. 
On December 2, 2001, Enron and certain of its subsidiaries each filed a 
voluntary petition for relief under chapter 11 of title 11 of the 
United States Code (the ``Bankruptcy Code'') in the United States 
Bankruptcy Court for the Southern District of New York (``Bankruptcy 
Court''). As of today, one hundred eighty (180) Enron-related entities 
have filed voluntary petitions. Under sections 1107 and 1108 of the 
Bankruptcy Code, the Enron and its subsidiaries that have filed 
voluntary petitions (``Debtors'') continue to operate their businesses 
and manage their properties as debtors in possession. Portland General, 
Enron's sole public utility subsidiary company, has not filed a 
voluntary petition under the Bankruptcy Code and is not in bankruptcy. 
Likewise, many other Enron companies that are operating companies have 
not filed bankruptcy petitions and continue to operate their 
businesses.
    The Debtors have been engaged, since the commencement of the 
chapter 11 cases, in the rehabilitation and disposition of their assets 
to satisfy the claims of creditors. The Debtors have been 
consolidating, selling businesses and assets, dissolving entities and 
simplifying their complex corporate structure. The Debtors also have 
been involved in the settlement of numerous contracts related to 
wholesale and retail trading of various commodities. The Debtors are 
holding cash from prior sales pending distribution under a chapter 11 
plan and are positioning other assets for sale or other disposition. In 
this process, hundreds of corporations have been or will be liquidated. 
Eventually, substantially all of the Debtors, including Enron, will be 
liquidated.
    The Debtors have worked with the Official Committee of Unsecured 
creditors appointed in the Debtors' chapter 11 cases (the ``Creditors'' 
Committee''), the examiner appointed by the Bankruptcy Court with 
respect to the chapter 11 case of Enron North America Corp. and 
individual creditor groups to formulate a chapter 11 plan. On July 11, 
2003, the Debtors filed a joint chapter 11 plan and a related 
disclosure statement which documents were subsequently amended several 
times. On January 12, 2004, the Debtors filed a fifth amended plan (the 
``Plan'') and a related amended disclosure statement with the 
Bankruptcy Court \2\. A hearing to consider the adequacy of the 
information contained in the disclosure statement was held commencing 
on January 6, 2004. On January 9, 2004, the Bankruptcy Court issued two 
orders approving the disclosure statement for the Plan, establishing 
voting procedures, and ordering the solicitation of votes approving or 
rejecting the Plan.
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    \2\ The Plan and related disclosure statement are available at 
www.enron.com and are included as exhibits to this Application. 
Unless defined in the text of this Application, all capitalized 
terms used in this notice follow definitions specified in the Plan.
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    The Plan provides for the appointment of a Reorganized Debtor Plan 
Administrator (``Administrator'') on the Effective Date for the purpose 
of carrying out the provisions of the Plan. Under the Plan, the 
Administrator would be Stephen Forbes Cooper, LLC, an entity headed by 
Stephen Forbes Cooper, Enron's Acting President, Acting Chief Executive 
Officer, and Chief Restructuring Officer. In accordance with the Plan, 
the Administrator shall be responsible for implementing the 
distribution of the assets in the Debtors' estates to the creditors, 
including, without limitation, the divestiture of Portland General 
common stock or the sale of that stock followed by the distribution of 
the proceeds to the Debtors' creditors and, possibly, equity interest 
holders. In addition, pursuant to the Plan, as of the Effective Date, 
the Reorganized Debtors will assist the Administrator in performing the 
following activities: (a) Holding the Operating Entities, including 
Portland General, for the benefit of creditors and providing certain 
transition services to such entities, (b) liquidating the Remaining 
Assets, (c) making distributions to creditors pursuant to the terms of 
the Plan, (d) prosecuting Claim objections and litigation, (e) winding 
up the Debtors' business affairs, and (f) otherwise implementing and 
effectuating the terms and provisions of the Plan.
    In a companion filing with the Commission (``Plan Application''), 
Applicants request an order: (i) Approving the Plan under section 11(f) 
of the Act; (ii) issuing a report on the Plan under section 11(g) of 
the Act; and (iii) authorizing Debtors under rules 60 and 62-64 to 
continue the Bankruptcy Court's authorized solicitation of votes of the 
Debtors' creditors for acceptances or rejections of the Plan and to 
make available to creditors a report on the Plan, as prescribed in 
section 11(g) of the Act.\3\
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    \3\ SEC File No. 70-10199, filed February 6, 2004.
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II. Requested Authority

    Enron has entered into an agreement to sell its only public utility 
subsidiary company, Portland General. The Plan also provides that 
Portland General would be sold or, in the event such transaction cannot 
be consummated, distributed to creditors and, in certain circumstances, 
equity interest holders \4\ as soon as requisite consents can be 
obtained and, as a possible intermediate step, the common stock of 
Portland General may be contributed to a trust (``PGE Trust''),\5\ that 
may be formed by December 31, 2004. Upon (i) the sale of Portland 
General, (ii) the distribution of the shares of Portland General to 
creditors, or (iii) the contribution of the Portland General common 
stock to the PGE Trust, it is anticipated that Enron would deregister 
as a holding company under the Act. Accordingly, this application seeks 
authorization for the proposed transactions through the earlier of the 
deregistration of Enron and July 31, 2005 (``Authorization Period''). 
Generally, Applicants request authority for certain financing, 
nonutility corporate reorganizations, dividends, affiliate sales of 
goods and services and other transactions described below to

[[Page 7033]]

allow Enron and its subsidiaries to continue to operate their 
businesses as both debtors in possession in bankruptcy and non-debtors.
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    \4\ Applicants submit that, in accordance with existing 
projections, existing Enron common stock and preferred stock are 
highly unlikely to receive any distributions pursuant to the Plan. 
However, the Plan provides Enron stockholders with a contingent 
right to receive a recovery in the event that the total amount of 
Enron's assets, including recoveries in association with litigation 
and the subordination, waiver or disallowance of Claims in 
connection therewith, exceeds the total amount of Allowed Claims 
against Enron. No distributions will be made in accordance with the 
Plan to holders of equity interests unless and until all unsecured 
claims are fully satisfied.
    \5\ There may be an adjustment in the number of Portland common 
shares prior to contribution to the PGE Trust and in all events 
prior to distribution to creditors. If the Portland General common 
stock is distributed to creditors rather than sold as described in 
this Application, it is intended that the current Portland General 
shares of common stock will be canceled and 80 million shares of new 
Portland General common stock will be authorized and approximately 
62.5 million shares issued pursuant to the Plan, in each case, 
representing 100% of the common equity of Portland General.
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A. Prisma

    Prisma Energy International Inc. (``Prisma''), a Cayman Islands 
limited liability company, was organized on June 24, 2003, for the 
purpose of acquiring the Prisma Assets, which include equity interests 
in certain international energy infrastructure businesses that are 
indirectly owned by Enron and certain of its affiliates, intercompany 
loans to the businesses held by affiliates of Enron, and contractual 
rights held by affiliates of Enron. Enron and its affiliates will 
contribute the Prisma Assets to Prisma in exchange for shares of Prisma 
Common Stock commensurate with the value of the Prisma Assets 
contributed.
    Prisma, Enron, and its affiliates also expect to enter into certain 
ancillary agreements, which may include a new Transition Services 
Agreement, a tax allocation agreement (``Prisma Tax Allocation 
Agreement'') and a Cross License Agreement. The employees of Enron and 
its affiliates who have been supervising and managing the Prisma Assets 
since December 2001, became employees of a subsidiary of Prisma 
effective on or about July 31, 2003. In connection therewith, as 
approved by the Bankruptcy Court, Enron and its affiliates entered into 
four separate Transition Services Agreements pursuant to which such 
employees will continue to supervise and manage the Prisma Assets and 
other international assets and interests owned or operated by Enron and 
its affiliates. The ancillary agreements, together with the Prisma 
Contribution and Separation Agreement, will govern the relationship 
between Prisma and Enron and its affiliates subsequent to the 
contribution of the Prisma Assets, provide for the performance of 
certain interim services, and define other rights and obligations until 
the distribution of shares of capital stock of Prisma pursuant to the 
Plan or the sale of the stock to a third party. In addition, the Prisma 
Contribution and Separation Agreement or the ancillary agreements are 
expected to set forth certain shareholder protection provisions with 
respect to Prisma and may contain indemnification obligations of the 
Prisma Enron Parties.
    Applicants intend that Prisma will certify as a foreign utility 
company (``FUCO'') under section 33 of the Act prior to the transfer of 
the businesses described above to Prisma. Applicants state that certain 
indemnification agreements between Enron group \6\ companies in 
connection with the contribution of the Prisma Assets would constitute 
the extension of credit among associate companies and require 
Commission authorization under section 12(b) of the Act and rule 45(a) 
under the Act. In addition, Applicants state that the Prisma Tax 
Allocation Agreement to be entered into among Prisma and its 
subsidiaries and Enron would comply with the requirements of rule 45(c) 
under the Act in all material respects, except that it would permit 
Enron to receive payment from the subsidiaries filing jointly with 
Enron for the value of any net operating losses or other tax attributes 
that resulted in a reduction in the consolidated tax, ratably with any 
other Enron subsidiary also contributing such tax benefits to the 
consolidated tax group. Accordingly, Applicants seek authorization to 
enter into indemnification agreements and the Tax Allocation Agreement 
in connection with the formation of Prisma as authorized by the 
Bankruptcy Court and as described above.
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    \6\ ``Enron group'' includes all of Enron's subsidiaries, 
whether or not they are Debtors.
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B. Cross Country

    CrossCountry was incorporated in the State of Delaware on May 22, 
2003. On June 24, 2003, CrossCountry and the CrossCountry Enron Parties 
entered into the original CrossCountry Contribution and Separation 
Agreement providing for the contribution of Enron's direct and indirect 
interests in its interstate pipelines and other related assets to 
CrossCountry. On September 25, 2003, the Bankruptcy Court issued an 
order approving the transfer of the pipeline interests and the related 
assets from the CrossCountry Enron Parties to CrossCountry and other 
related transactions, pursuant to the original CrossCountry 
Contribution and Separation Agreement. That order contemplates that the 
parties may make certain modifications to the original Contribution and 
Separation Agreement. The parties have negotiated an Amended and 
Restated Contribution and Separation Agreement that incorporates 
certain changes to the original Contribution and Separation Agreement 
including the substitution of CrossCountry Energy LLC (``CrossCountry 
LLC'') in place of CrossCountry as the holding company owning the 
pipeline interests.
    Pursuant to the Amended and Restated Contribution and Separation 
Agreement, Enron and certain of its affiliates will contribute their 
ownership interests in certain gas transmission pipeline businesses and 
certain nonutility service companies to CrossCountry LLC in exchange 
for equity interests in CrossCountry LLC. The closing of the 
transactions contemplated by the Amended and Restated Contribution and 
Separation Agreement is expected to occur as soon as possible. It is 
anticipated that, following confirmation of the Plan and prior to the 
CrossCountry Distribution Date, the equity interests in CrossCountry 
LLC will be exchanged for equity interests in CrossCountry Distributing 
Company in the CrossCountry transaction. As a result of the 
CrossCountry transaction, CrossCountry Distributing Company will obtain 
direct or indirect ownership in the Pipeline Businesses and certain 
service companies described below.
    Applicants state that the agreements among companies in the Enron 
group to indemnify other Enron group companies in connection with the 
contribution of these businesses and the financing of the CrossCountry 
entities constitute extensions of credit among associate companies 
under section 12(b) of the Act and rule 45(a) under the Act. In 
addition, the Amended and Restated Contribution and Separation 
Agreement contemplates that a tax allocation agreement (``CrossCountry 
Tax Allocation Agreement'') would be entered into among CrossCountry 
and its subsidiaries and Enron. Applicants state that the CrossCountry 
Tax Allocation Agreement would comply with the requirements of rule 
45(c) under the Act in all material respects, except that it would 
permit Enron to receive payment from the subsidiaries filing jointly 
with Enron for the value of any net operating losses or other tax 
attributes that resulted in a reduction in the consolidated tax, 
ratably with any other Enron subsidiary also contributing such tax 
benefits to the consolidated tax group.
    Therefore, Applicants seek authorization to enter into the 
CrossCountry transaction consistent with the authorization granted by 
the Bankruptcy Court and with the terms and conditions of the Amended 
and Restated Contribution and Separation Agreement, including, but not 
limited to, the indemnification agreements, the Tax Allocation 
Agreement, and related financing transactions in connection with the 
formation of CrossCountry as authorized by the Bankruptcy Court and as 
described above.

[[Page 7034]]

C. Other Financing Transactions

1. Debtor-in Possession (``DIP'') Financing Arrangements
    Enron has four letters of credit outstanding under the Second 
Amended DIP Credit Agreement in the approximate aggregate amount of 
$24.5 million. Applicants seek Commission authorization to continue to 
obtain letters of credit, or to extend the maturity of previously 
issued letters of credit, up to an aggregate amount of $150 million 
under the Second Amended DIP Credit Agreement as now in effect or as it 
may subsequently be amended or extended by order of the Bankruptcy 
Court through the Authorization Period. Applicants also request 
authorization for additional debtors to become guarantors under the 
agreement when the Bankruptcy Court enters an applicability order with 
respect to such debtor making the provisions of the Second Amended DIP 
Credit Agreement applicable to such entity.
2. Pre-petition Letters of Credit
    In a limited number of instances, the Debtors may be obligated on 
reimbursement agreements in connection with certain letters that are 
still outstanding and which the issuing bank may choose to extend, 
without the consent or involvement of a Debtor. This renewal is beyond 
the control of the Debtors and the Debtors do not take any affirmative 
action in connection with such renewal. Absent such a renewal, the 
beneficiary of the letter of credit would have a right to draw on the 
letter of credit, to the detriment of both the lender that issued the 
letter of credit and the Debtors who have a pre-petition reimbursement 
obligation to such lenders. To the extent necessary, Applicants seek 
Commission authorization for such involuntary extension of the maturity 
of any such letter of credit.
3. Enron Cash Management
    Enron managed its cash on a centralized basis with funds loaned to 
or from Enron and to subsidiaries. Enron is permitted to continue to 
borrow from or lend to certain subsidiaries under terms specified by 
the Bankruptcy Court. Orders of the Bankruptcy Court dated December 3, 
2001 and February 25, 2002, permit, among other things, the Debtors to 
use their centralized cash management system, subject to certain 
modifications including a grant of adequate protection for intercompany 
transfers in the form of superpriority Junior Reimbursement Claims and 
Junior Liens.
    Applicants seek Commission authorization to continue to borrow and 
lend funds between associated companies in accordance with the Amended 
Cash Management Order as such order may be amended by the Bankruptcy 
Court.
4. Portland General Cash Management Agreements
    Portland General has entered into agreements with its wholly-owned 
subsidiaries for cash management. Under the agreements, Portland 
General periodically transfers from the bank accounts of each 
subsidiary any cash held in the subsidiary's bank account. If the 
subsidiary has cash needs in excess of any amount remaining in the 
account, upon request, Portland General transfers the required amount 
into the subsidiary's bank account. Portland General does not pay 
interest on the amounts transferred from a subsidiary's account unless 
the closing balance of the amount transferred at the end of any month 
exceeds $500,000. Any interest paid is at an annual rate of 3% and is 
retained by Portland General until returned to the subsidiary to meets 
its cash needs. All administrative expenses are borne by Portland 
General. Portland General seeks authorization to continue to perform 
under such cash management agreements.
5. Global Trading Contract and Assets Settlement and Sales Agreements
    Certain settlement agreements and asset sales entered into by Enron 
and its subsidiaries may involve extensions of credit among associate 
companies subject to section 12(b) of the Act and rule 45(a) under the 
Act. Enron's subsidiaries were extensively engaged in the retail and/or 
wholesale trading in various commodities including, but not limited to, 
energy, natural gas, paper pulp, oil and currencies. Subsequent to the 
bankruptcy filings, these companies now are engaged in settling these 
contracts with unaffiliated counterparties under a settlement process 
approved by both the Creditors' Committee and the Bankruptcy Court. In 
addition, asset or stock sale agreements may be entered into between 
Enron and/or its subsidiaries and unaffiliated counterparties. The 
settlements and sales may involve extensions of credit among associate 
companies, guaranties and indemnifications. Under a settlement 
agreement, or asset or stock sale agreement, the value associated with 
a group of contracts or claims may be netted into a single aggregate 
payment to be paid to the appropriate debtor(s) to resolve all claims 
between the settling Enron companies and the settling counterparty 
companies. Although undefined at the time of the settlement, each 
settling company presumably has some right to a portion of the 
settlement proceeds or a liability for a portion of the settlement 
payment, so, arguably, collecting or paying the funds centrally would 
create a form of an intercompany extension of credit, but only as a 
result of allocation findings by the Bankruptcy Court and not as a 
result of intended extensions of credit among associated companies. 
Accordingly, Applicants seek to continue to execute settlement 
agreements and asset or stock sale agreements.\7\
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    \7\ Any settlement or sale proceeds or costs aggregated as a 
result of a settlement will be allocated among the Enron group 
companies as required by the Bankruptcy Court.
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6. Portland General Short-Term Financing
    Upon Enron's registration under the Act, Commission authorization 
would be required for Portland General to issue debt with a maturity of 
less than one year. Such securities are not required to be authorized 
by the Oregon Public Utility Commission (``OPUC'') and the exemption 
provided by rule 52(a), therefore, would not be applicable.\8\
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    \8\ Issuance of such securities would be subject to approval of 
the Federal Energy Regulatory Commission (``FERC''). Portland 
General currently has FERC authorization to issue short-term debt up 
to $550 million.
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    Portland General requests authorization to issue short-term debt in 
accordance with an existing short-term revolving credit facility with 
certain banks under the terms and conditions described below. In 
addition, Portland General requests authorization, through the 
Authorization Period, to issue short-term debt in the form of 
institutional borrowings, bid notes and commercial paper as necessary 
to supplement or replace the short-term revolving credit facility. 
Portland General also requests authorization to issue letters of credit 
to provide credit support for trading contracts and other uses.
    All issuances of short-term debt would not exceed $350 million in 
aggregate principal amount outstanding. Pricing and other terms at the 
time of issuance will be comparable to issuances by companies with 
comparable credit ratings and credit profile with respect to debt 
having similar maturities. In addition, Portland General will not issue 
any additional short-term debt if Portland General's common stock 
equity as a percentage of total capitalization is less than 30%, after 
giving effect to the issuance.
    Portland General requests that the Commission reserve jurisdiction 
with

[[Page 7035]]

respect to the issuances of short-term debt under the requested 
authorization if, at the time of issuance, Portland General does not 
have an investment grade credit rating from at least one nationally 
recognized statistical rating organization.
    Under the terms of Portland General's $150 million 364-day 
revolving credit facility (``Facility''), Portland General currently 
has approximately $130 million available borrowing capacity. Portland 
General may borrow, repay and reborrow pursuant to the Facility for a 
period lasting through May 27, 2004. The Facility is secured by 
Portland General's first mortgage bonds. The security gives the lenders 
under the Facility pari passu status with Portland General's first 
mortgage bondholders.
    Portland General proposes to use funds raised under the short-term 
authorization requested in this Application for general corporate 
purposes, including (1) financing, in part, investments by, and capital 
expenditures of, Portland General, (2) financing the working capital 
requirements of Portland General, (iii) funding future investments in 
subsidiary companies, and (iv) repaying, redeeming, refunding or 
purchasing any securities issued by Portland General. Portland General 
also may issue letters of credit to provide credit support for trading 
contracts and other uses, but would not use any financing authorized 
herein for businesses other than those conducted by Portland General 
and its subsidiaries. Portland General is restricted, without prior 
OPUC approval, from making dividend distributions to Enron that would 
reduce Portland General's common equity capital below 48% of total 
capitalization (excluding short-term borrowings).
    Portland General also seeks authorization to issue additional 
short-term debt generally in the form of, but not limited to, 
institutional borrowings, commercial paper and bid notes as may be 
necessary to replace, extend, rearrange, modify or supplement the 
Facility described above. Portland General may sell commercial paper, 
from time to time, in established U.S., Canadian or European commercial 
paper markets. Such commercial paper would be sold through agents at 
the discount rate or the coupon rate per annum prevailing at the date 
of issuance for commercial paper of comparable quality and maturities 
sold to commercial paper dealers generally.
    Portland General also may establish bank lines of credit, directly 
or indirectly through one or more financing subsidiaries. Loans under 
these lines will have maturities of less than one year from the date of 
each borrowing. Alternatively, if the notional maturity of short-term 
debt is greater than 364 days, the debt security will include put 
options at appropriate points in time to cause the security to be 
accounted for as a current liability under U.S. generally accepted 
accounting principles. Portland General also proposes to engage in 
other types of short-term financing generally available to borrowers 
with comparable credit ratings and credit profile, as it may deem 
appropriate in light of its needs and market conditions at the time of 
issuance.
7. Foreign Assets
    Enron's foreign pipeline, gas and electricity distribution and 
power generation assets typically have FUCO status or exempt wholesale 
generator (``EWG'') status at the project level. Enron has prepared and 
filed or is in the process of preparing FUCO certifications to obtain 
FUCO status for the Enron holding companies that hold a number of these 
projects. Most of these holding companies were formed to hold assets 
along geographical lines (e.g., Enron South America LLC holds many of 
the Enron interests in South American projects).\9\ Some Enron group 
companies, however, may be related to the business of Prisma, but may 
not qualify for FUCO status because they may not directly or indirectly 
own or operate foreign utility assets. Such companies may, for example, 
have loans outstanding to a FUCO or a subsidiary of a FUCO. In other 
cases, such as settlements or asset reorganizations, the securities of 
a FUCO may be acquired by Enron group companies.
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    \9\ Many of the foreign assets will likely be transferred into 
Prisma. As indicated above, the shares of Prisma may be distributed 
to creditors in connection with the implementation of Enron's 
chapter 11 plan or Prisma may be sold and the proceeds will then be 
distributed to creditors.
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    Accordingly, the Enron group companies request authorization under 
section 33(c) and rule 53(c) under the Act, to issue new securities for 
the purpose of financing FUCOs (or to amend the terms of existing 
financings) and to acquire FUCO securities in connection with 
financings, settlements and reorganizations. Applicants request that 
authorization for purposes of financing new investments in their 
existing FUCOs be limited to $100 million (``FUCO Financing Limit'').

D. Sale of Nonutility Companies

    The Debtors, non-Debtor associates, and certain other related 
companies have completed a number of significant asset sales during the 
pendency of the chapter 11 cases, resulting in gross consideration to 
the Debtors' bankruptcy estates, non-Debtor associates, and certain 
other related companies aggregating approximately $3.6 billion. In most 
cases, the sale transactions are for all cash consideration. Some 
sales, however, may involve the acquisition of a security from the 
purchaser or the company being sold. A security would be accepted only 
when the transaction could not otherwise be negotiated for all cash 
consideration. For the most part, the Debtors would seek to convert 
securities into cash. Any security not converted into cash by the time 
the assets of the estates are distributed to creditors would reside in 
the Remaining Assets Trust, and creditors would receive an interest in 
that liquidating trust.
    Indemnifications and guarantees by and between companies in the 
Enron group also may be part of the sale of nonutility assets, 
nonutility securities or settlements on claims with third parties. In 
the case of sales to third parties, indemnifications are capped at no 
more than the amount of the sale proceeds received by the seller. 
Applicants request indemnification and guarantee authority to provide 
them with the flexibility to manage the process of selling the assets 
of the estates in a manner that would maximize their value.
    Applicants seek authorization for transactions involving the 
acquisition of securities, indemnifications and guarantees described 
above as they would occur in the context of the sale of any Enron group 
company (except Portland General) if such sale is (i) in the ordinary 
course of business of a debtor in possession (directly or indirectly 
through debtor or non-debtor subsidiaries) or, (ii) is authorized by 
the Bankruptcy Court.\10\
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    \10\ The transactions proposed herein would not involve 
indemnifications or guarantees made by Portland General and would 
not have an adverse impact on that company.
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E. Dividends Out of Capital or Unearned Surplus

    Applicants request general relief from the dividend and 
acquisition, retirement and redemption restrictions under section 12(c) 
of the Act and the rules under the Act as necessary in furtherance of 
the chapter 11 process to reorganize and reallocate value in the Enron 
group that will ultimately be distributed to creditors. Applicants also 
request specific relief for one subsidiary company, Northern Border 
Partners,

[[Page 7036]]

relating to distributions of Available Cash \11\ that are largely to be 
received by the public unit holders of this non-debtor subsidiary.\12\ 
The Applicants seek an exception from the dividend restrictions under 
the Act as applied to all nonutility subsidiaries in the Enron group 
subject to the conditions noted above.
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    \11\ Available Cash is defined under the Partnership Agreement 
to include cash derived from all sources including partnership 
holdings, financings and sale of assets less cash that is used for 
operating expenses, taxes, debt service payments, capital 
expenditures and contributions and increases to reserves.
    \12\ Corporations may pay dividends out of current income and 
retained earnings consistent with the restriction in section 12(c) 
of the Act which limits only dividends paid out of capital and 
capital surplus. Partnerships do not have a retained earnings 
account, so partnership distributions of available cash would come 
from current net income of the partnership, and partners' capital to 
the extent current net income of the partnership is insufficient to 
cover the whole distribution. Northern Border Partners' request to 
pay distributions in the amount of its Available Cash may require 
authorization under section 12(c) of the Act to the extent that 
Available Cash exceeds current partnership net income.
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    Section 12(c) of the Act restricts the acquisition, retirement or 
redemption of the securities of a registered holding company or 
subsidiary by the issuer of such securities, in contravention of the 
rules, regulations or orders of the Commission. Under rule 42, the 
effect of this prohibition is to continue to require Commission 
approval for purchases and redemptions from associates and affiliates. 
To permit the Enron group companies to transfer value among the 
companies in the Enron group as necessary to sell assets or to transfer 
the proceeds of such sales from subsidiaries to parent companies, 
Applicants request authorization for the Enron group companies, other 
than Portland General, to acquire, retire and redeem securities that 
they have issued.\13\
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    \13\ Portland General has 249,727 outstanding shares of 
preferred stock. Should Portland General exercise its right to 
redeem any of its preferred stock it would rely on the exemption 
under rule 42 for the acquisition of stock from unaffiliated 
entities.
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F. New Acquisitions

    Through several subsidiaries, Northern Border Partners, a non-
Debtor subsidiary of Enron, owns transportation gas systems (Northern 
Border Pipeline Company, Midwestern Gas Transmission Company, Viking 
Gas Transmission Company and a one third interest in Guardian Pipeline, 
L.L.C.) and gas gathering systems located in the Powder River Basin, 
the Wind River Basin, and the Williston Basin located in Wyoming, 
Montana, and the Dakotas. Through its subsidiary, Crestone Energy 
Ventures, L.L.C, Northern Border Partners owns a 49% interest in 
Bighorn Gas Gathering, L.L.C.; a 33.33% interest in Fort Union Gas 
Gathering, L.L.C.; and a 35% interest in Lost Creek Gathering, L.L.C. 
The gathering facilities interconnect to the interstate gas grid 
pipeline serving natural gas markets in the Rocky Mountains, the 
Midwest, and California. Northern Border Partners also owns a minority 
interest in a gas gathering system in Alberta, Canada. Northern Border 
Partners' 273-mile coal slurry pipeline connects a coal mine in Arizona 
to a power station in Nevada.
    Northern Border Partners seeks authorization to, directly or 
indirectly through subsidiaries, issue and sell equity and debt 
securities to fund general partnership operations and new acquisitions 
of assets producing qualifying income and to acquire the securities of 
or other interests in gas-related properties.
    Northern Border Partners currently has an effective shelf 
registration statement on Form S-3 for issuance of $500 million in 
equity or debt securities, of which approximately $102 million in 
equity was issued in May and June 2003. Depending on the results of its 
acquisition program, Northern Border Partners believes that during the 
course of the next year it may need to issue an additional $500 million 
to keep Northern Border Partners on an equal footing with its 
competitors in the acquisition market. Therefore, Northern Border 
Partners requests authorization under the Act to issue up to $1 billion 
of equity and debt securities at any one time outstanding through July 
31, 2005, and to invest up to that amount in the acquisition of 
qualifying income assets (described below) without further Commission 
authorization.
    Northern Border Partners requests authority to continue the 
ordinary course of its natural gas gathering, processing, storage and 
transportation operations in the United States and Canada (``Energy 
Assets''), which are generally conducted through partnerships and other 
companies, and through the acquisition of partnership or joint venture 
interests. To that end, Northern Border Partners requests authority to 
acquire and finance the acquisition of Energy Assets and the securities 
of companies which solely develop, finance, own and operate such Energy 
Assets within the United States and Canada up to a total authorized 
additional investment of $1 billion through the Authorization Period.

G. Simplifying Complex Corporate Structure and Dissolving Existing 
Subsidiaries

    Enron seeks Commission authorization to restructure, rationalize 
and simplify or dissolve, as necessary, all of its nonutility 
businesses and implement settlements (which may involve transactions as 
described above regarding substantially all of its remaining direct and 
indirect assets) to effect all transactions authorized by the 
Bankruptcy Court and otherwise as necessary to simplify and restructure 
its businesses in furtherance of the chapter 11 process.\14\ Applicants 
also seek authorization to form, merge, reincorporate, dissolve, 
liquidate or otherwise extinguish companies. Any newly formed entity 
would engage only in businesses in which the Enron group continues to 
engage pending the resolution of the chapter 11 cases. Further, 
Applicants seek authorization to restructure, forgive or capitalize 
loans and other obligations and to change the terms of outstanding 
nonutility company securities held by other Enron group companies for 
the purpose of facilitating settlements with creditors, simplifying the 
business of the group and maximizing the value of the Debtors' estates.
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    \14\ As previously requested above, Applicants seek 
authorization to acquire, redeem and retire securities and to pay 
dividends out of capital and unearned surplus, provided that such 
transactions are consistent with applicable corporate or partnership 
law and any applicable financing covenants.
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H. Rule 16 Exemptions

    Citrus Corp. (``Citrus''), a holding company which is 50% owned by 
Enron and 50% owned by El Paso Corp., has the following subsidiaries: 
FGT, Citrus Trading Corp. (``CTC''), and Citrus Energy Services, Inc. 
(``CESI''). FGT is engaged in the transportation of natural gas in 
interstate commerce, subject to the jurisdiction of the Federal Energy 
Regulatory Commission. CTC is engaged in the supply of natural gas, 
while CESI is engaged in transportation management, having recently 
terminated its facilities operation and maintenance business. FGT owns 
and operates gas transmission facilities that extend from South Texas 
to South Florida along the Gulf of Mexico. Bridgeline Holdings, L.P. 
(``Bridgeline''), is an intrastate gas pipeline partnership that is 
engaged in the storage, transportation and supply of natural gas in 
Louisiana. Enron indirectly owns a 40% equity interest in the 
partnership and a 50% voting interest in the partnership, with the 
remaining equity

[[Page 7037]]

and voting interest held by ChevronTexaco Corp.
    Besides Northern Border Partners' extensive gas gathering 
operations in the Williston Basin in Montana and North Dakota as well 
as in the Powder River Basin in Wyoming, through its wholly owned 
subsidiary, Crestone Energy Ventures, L.L.C., Northern Border Partners 
owns a 49% interest in Bighorn Gas Gathering, L.L.C. (``Bighorn''), a 
33.3% interest in Fort Union Gas Gathering, L.L.C. (``Fort Union''), 
and a 35% interest in Lost Creek Gathering, L.L.C. (``Lost Creek''). 
These three companies which collectively own over 300 miles of gas 
gathering facilities in the Powder River and Wind River Basins in 
Wyoming. Northern Border Partners also owns an undivided interest in a 
86-mile gathering pipeline in Alberta, Canada.
    The Bighorn and Fort Union systems gather coalbed methane gas 
produced in the Powder River Basin in Wyoming. The remaining ownership 
interest in Bighorn is held by Cantera Gas Company, which is the 
operator. The remaining ownership interest in Fort Union is held by 
Cantera Gas Company, Western Gas Resources, Bargath, Inc. and CIG 
Resources Company. Cantera Gas Company is the managing member, Western 
Gas Resources is the field operator and CIG Resources Company is the 
administrative manager. Burlington Resources Trading, Inc. holds the 
remaining interest in Lost Creek and is the managing member. The Lost 
Creek system gathers natural gas produced from conventional gas wells 
in the Wind River Basin in central Wyoming. Through its subsidiary, 
Border Midstream Services, Ltd., Northern Border Partners owns an 
undivided interest in the Gregg Lake/Obed Pipeline in Alberta, Canada 
which entitles Border Midstream to a voting interest of 36%. The 
pipeline is operated by a third party, Central Alberta Midstream.
    Northern Border Partners also owns an undivided one-third interest 
in Guardian Pipeline, L.L.C. (``Guardian''), a 141-mile interstate 
natural gas pipeline system which transports natural gas from Joliet, 
Illinois to a point west of Milwaukee, Wisconsin. Subsidiaries of 
Wisconsin Public Service and Wisconsin Energy Corporation hold the 
remaining interests in this system.
    Each of Citrus, Bridgeline, Bighorn, Fort Union, Lost Creek and 
Guardian (the ``Rule 16 Companies'') seek to rely on an exemption from 
the obligations, duties and liabilities imposed upon them under the Act 
as a subsidiary or affiliate of a registered holding company. 
Accordingly, Applicants request that the Commission authorize Enron to 
acquire its respective interests in the Rule 16 Companies under 
Sections 9(a)(1) and 10, subject to any requirement in the Plan or as 
may be imposed by the Bankruptcy Court for the subsequent disposition 
of these assets.

I. Affiliate Transactions

    Portland General has entered into a master service agreement 
(``MSA'') with certain affiliates, including Enron. The MSA allows 
Portland General to provide affiliates with the following general types 
of services: Printing and copying, mail services, purchasing, computer 
hardware and software support, human resources support, library 
services, tax and legal services, accounting services, business 
analysis, product development, finance and treasury support, and 
construction and engineering services. The MSA also allows Enron to 
provide Portland General with the following services: executive 
oversight, general governance, financial services, human resource 
support, legal services, governmental affairs service, and public 
relations and marketing services. Portland General would provide 
services to affiliates at cost under the MSA and affiliate services 
provided to Portland General also would be priced at cost.\15\
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    \15\ If cost based pricing of particular services provided under 
the MSA would conflict with the affiliate transaction pricing rules 
of the OPUC, Portland General and Enron would refrain from providing 
such services, unless they have first obtained specific 
authorization from the OPUC to use cost based pricing for such 
services.
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    Enron provides certain employee health and welfare benefits, 
401(k), and insurance coverages to Portland General under the MSA that 
are directly charged to Portland General based upon Enron's cost for 
those benefits and coverages. The estimated cost of these services for 
the year 2004 in the aggregate is $26 million. The provision of these 
services is anticipated to continue until such services are replaced, 
which Enron expects will occur by the end of 2004.
    Portland General provides certain administrative services to 
Enron's subsidiary Portland General Holdings (``PGH'') and its 
subsidiaries under the MSA. The services that are allocated or directly 
charged to PGH and its subsidiaries based upon the cost for those 
services. The estimated cost of these services for the year 2004 in the 
aggregate is $700,000.
    Applicants request that the Commission reserve jurisdiction with 
respect to any amendments to service arrangements involving Portland 
General, such as the Transition Services Agreement, pending completion 
of the record.
    The nonutility subsidiaries in the Enron group also are engaged in 
providing services to one another. These services include, without 
limitation, environmental, right-of-way, safety, information 
technology, accounting, planning, finance, tax, procurement, accounts 
payable, human resources, regulatory, and legal services.
    Enron Operation Services Corp. (``EOSC'') or its affiliates, 
including CES, also provides services to Citrus and its subsidiaries 
under an operating agreement originally entered into between an Enron 
affiliate and Citrus. The primary term of the operating agreement 
expired on June 30, 2001; however, services continue to be provided 
pursuant to the terms of the operating agreement. Under an implied 
agreement pursuant to the terms of the operating agreement, Citrus 
reimburses the service provider for costs attributable to the 
operations of Citrus and its subsidiaries.
    Northern Plains provides operating services to the Northern Border 
Partners pipeline system pursuant to operating agreements entered into 
with Northern Border Pipeline, Midwestern, and Viking. Under these 
agreements, Northern Plains manages the day-to-day operations of 
Northern Border Pipeline, Midwestern, and Viking, and is compensated 
for the salaries, benefits, and other expenses it incurs. Northern 
Plains also utilizes Enron affiliates for administrative and operating 
services related to Northern Border Pipeline, Midwestern, and Viking. 
NBP Services provides certain administrative and operating services for 
Northern Border Partners and its gas gathering and processing and coal 
slurry businesses. NBP Services is reimbursed for its direct and 
indirect costs and expenses pursuant to an administrative services 
agreement with Northern Border Partners. NBP Services also utilizes 
Enron affiliates to provide these services.
    It is anticipated that at the closing of the transactions 
contemplated by the CrossCountry Amended and Restated Contribution and 
Separation Agreement, CrossCountry and Enron will enter into a 
Transition Services Agreement pursuant to which Enron will provide to 
CrossCountry, on an interim, transitional basis, various services, 
including, but not limited to, the following categories of services: 
(i) Office space and related services, (ii) information technology 
services, (iii) SAP accounting system usage rights and administrative 
support, (iv) tax services, (v) cash management services, (vi)

[[Page 7038]]

insurance services, (vii) contract management and purchasing support 
services, (viii) corporate legal services, (ix) corporate secretary 
services, (x) off-site and on-site storage, (xi) payroll, employee 
benefits and administration services, and (xii) services from RAC on a 
defined project basis.
    CrossCountry will provide to Enron, on an interim, transitional 
basis, various services, including, but not limited to, the following 
categories of services: (i) Floor space for servers and other 
information technology equipment, (ii) technical expertise and 
assistance, including, without limitation, pipeline integrity, safety, 
environmental and compliance, (iii) accounts payable support, and (iv) 
accounting services relating to businesses owned directly or indirectly 
by ETS immediately prior to closing.
    The parties are expected to enter into a Transition Services 
Supplemental Agreement at the closing of the Amended and Restated 
Contribution and Separation Agreement. Subject to the consent of the 
Creditors' Committee, the Transition Services Supplemental Agreement 
will more fully delineate the services provided within each category 
set forth in the Transition Services Agreement. The charges for such 
transition services will be cost-based in accordance with section 13(b) 
and rules 90 and 91. Certain services will be charged on an ``as 
needed'' basis.
    Provision of the transition services will commence on the effective 
date of the Transition Services Agreement and terminate on December 31, 
2004, unless otherwise agreed in writing by the parties. However, 
except as otherwise provided for in the Transition Services 
Supplemental Agreement, Enron may terminate any transition service upon 
ninety days' prior written notice to CrossCountry.
    It is also anticipated that at the closing of the transactions 
contemplated by the CrossCountry Amended and Restated Contribution and 
Separation Agreement, Enron and certain of its subsidiaries and 
affiliated companies will enter into a Cross License Agreement pursuant 
to which each of the companies that is a party to the Cross License 
Agreement will grant, without warranty of any kind, to each and every 
other party and its respective subsidiaries, all of the intellectual 
property rights of the party granting the license in and to certain 
software programs, documentation, and patents described in the Cross 
License, a non-exclusive, royalty free, sublicensable license, with 
fully alienable rights, to: (i) use, copy, and modify the licensed 
programs and documentation; (ii) use, make, have made, distribute, and 
sell any and all products and services of the party receiving the 
license as well as such party's subsidiaries and sublicensees (if any); 
and (iii) engage in the business of such party receiving the license 
and business of its subsidiaries and sublicensees (if any) prior to, 
on, and after the closing date.
    The Cross License Agreement will become effective on the closing 
date and the licenses granted will continue in perpetuity unless 
licenses granted to a breaching party are terminated by any affected 
non-breaching party in the event such breaching party fails to cure a 
material breach of the Cross License Agreement within thirty days after 
delivery of written notice of the breach.
    Finally, prior to or at the closing of the CrossCountry Amended and 
Restated Contribution and Separation Agreement, Enron and CrossCountry 
will enter into a license or lease agreement under which CrossCountry 
will lease to Enron adequate floor space in the Ardmore Data Center for 
servers and other information technology equipment owned by the 
CrossCountry Enron Parties. The space will be provided on a cost basis 
for a term to be specified in the Ardmore Collocation License 
Agreement.
    Prisma and Enron and its affiliates also expect to enter into 
certain ancillary agreements, which may include a new Transition 
Services Agreement, a tax allocation agreement discussed below, and a 
Cross License Agreement. The employees of Enron and its affiliates who 
have been supervising and managing the Prisma Assets since December 
2001, became employees of a subsidiary of Prisma effective on or about 
July 31, 2003. In connection therewith, as approved by the Bankruptcy 
Court, Enron and its affiliates entered into four separate Transition 
Services Agreements pursuant to which such employees will continue to 
supervise and manage the Prisma Assets and other international assets 
and interests owned or operated by Enron and its affiliates. The 
ancillary agreements, together with the Prisma Contribution and 
Separation Agreement, will govern the relationship between Prisma and 
Enron and its affiliates subsequent to the contribution of the Prisma 
Assets, provide for the performance of certain interim services, and 
define other rights and obligations until the distribution of shares of 
capital stock of Prisma pursuant to the Plan or the sale of the stock 
to a third party. In addition, the Prisma Contribution and Separation 
Agreement or the ancillary agreements are expected to set forth certain 
shareholder protection provisions with respect to Prisma and may 
contain indemnification obligations of the Prisma Enron Parties.
    Enron requests authority through the Authorization Period to 
provide the services specified above at other than cost due to the 
special and unusual circumstances of its bankruptcy.
    Applicants, other than Enron, that are providing goods and services 
at terms other than cost to associate companies, other than Portland 
General, also request authority through the Authorization Period to 
provide the services specified above at other than cost due to the 
special and unusual circumstances of its bankruptcy.

J. Tax Allocation Agreements

    Enron has entered into agreements with Portland General and 
Transwestern for the payment and allocation of tax liabilities on a 
consolidated group basis. These agreements generally require the 
subsidiaries to pay their separate return tax to Enron. In 
consolidation, Enron offsets the subsidiaries' income with the losses, 
tax credits and other tax-reducing attributes of Enron and other group 
companies and pays the resulting lower tax liability amount to the 
Internal Revenue Service or other taxing authority. Under the 
agreements, group companies, including Enron, that contributed tax 
benefits such as losses or credits to the consolidated return are paid 
their proportionate share of the tax reduction resulting from the use 
of such benefits in the consolidated tax return filing. Enron seeks 
authorization to continue to perform under these current agreements (or 
new agreements on similar terms) and for CrossCountry to enter into a 
new tax allocation agreement with Enron, when Transwestern is 
contributed to CrossCountry. Further, it is contemplated that the 
existing tax allocation agreement with Portland General may be amended 
to provide that Enron would pay Portland General for certain Oregon 
state tax credits generated by Portland General but not used on the 
consolidated Oregon tax return. Enron and Portland General also seek 
authorization to amend the Portland General tax allocation agreement 
accordingly.
    Enron also has other written and oral tax-related agreements with 
other Enron group companies. It is contemplated that these agreements 
will be rejected as executory contracts by the Debtors on the 
Confirmation Date, with an effective date as of December 2, 2001 
(Enron's bankruptcy petition date). Notwithstanding this rejection, 
Enron will continue to file a consolidated tax return as required by 
the Internal

[[Page 7039]]

Revenue Code. In such circumstances, Enron will no longer charge 
companies with income the stand-alone tax that they would pay on their 
income but for the consolidated losses. Enron generally would no longer 
pay loss companies for the benefit of their losses used to offset 
income on the consolidated return, except that it is expected that 
payments to Enron under the Portland General and CrossCountry tax 
allocation agreements would be shared with all loss companies 
consistent with past practice. Portland General, Transwestern and 
Prisma (discussed further below) are not part of this arrangement. 
Applicants request authorization for Enron and the other Enron group 
companies subject to the contract rejection described above to file 
consolidated returns in accordance with the method described above.

K. U5B Registration Statement

    Enron seeks a modification to the Commission's reporting 
requirement to permit it to submit the Disclosure Statement in lieu of 
a Registration Statement on Form U5B. If the Commission staff indicates 
to Enron that it requires additional information called for in Form U5B 
but not included in the Disclosure Statement, Enron will undertake to 
promptly provide such additional information.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-3111 Filed 2-11-04; 8:45 am]
BILLING CODE 8010-01-P