July 5, 2000
VIA Telecopy
Tennessee Valley Authority
1101 Market Street
Chattanooga, Tennessee 37402-2601
Attention:  Electric System Operations
Tennessee Valley Authority
1101 Market Street, MR BK
Chattanooga, Tennessee  37402-2801
Attention:  Mr. Gary Jackson
Re:	December 6, 1995 Master Option Purchase Agreement by and between Enron Power Marketing, Inc. and Tennessee Valley Authority
Dear Mr. Jackson:

	In a follow-up to our letter of June 21, 2000, EPMI remains very concerned about TVA's efforts to mitigate its alleged damages under the MOPA.  As you are aware, EPMI offered pursuant to letters dated January 6, 2000 and January 26, 2000 to sell the MOPA quantity of energy to TVA sufficient to cover any energy that TVA otherwise would have scheduled under the MOPA during the pendency of the litigation pending between EPMI and TVA (Case No. ______________) (the "Litigation"), subject in all cases to EPMI returning any amounts received from TVA in excess of the contract price under the MOPA if it was ultimately determined that EPMI had acted improperly.  TVA rejected each of these proposals.  While EPMI is confident that it has acted in accordance with the MOPA and that it owes no damages to TVA, EPMI is willing to re-extend the offers previously made to TVA to sell the MOPA energy at market-based rates pending the outcome of the Litigation currently scheduled to begin in October 2001.
In this connection and subject to the terms set forth below, EPMI hereby offers to make energy available to TVA under the same terms and conditions set forth in the MOPA. EPMI's offer is further subject to the following provisions:
1.	The Energy Charge for the OPAs numbered SP00-20-1 through – 48 would be $____ per MWH.
2.	The Energy Charge for the OPAs numbered WP00-20-1 through – 32 would be $____ per MWH.
3.	The Energy Charge for the OPAs numbered SP01-20-1 through – 48 would be $____ per MWH.
4.	If necessaary due to the timing of the Litigation and TVAs proper exercise of the OPAs, the Energy Charge for the OPAs numbered WP01-20-1 through – 32 would be $____ per MWH.
5.	TVA would pay the Option Premium and Demand Charge for all OPAs.
6.	All Option Premiums, Demand Charges, and Energy Charges would be paid by TVA into an escrow account pursuant to an escrow account to be negotiated between the parties (the "Escrow Agreement") with the proceeds thereof being released pending either the mutual agreement of TVA and EPMI or the resolution and satisfaction of all disputes between EPMI and TVA in the Litigation
7.	EPMI's offer is contingent upon the execution by EPMI and TVA of an Escrow Agreement on or before ______, 2000.
8.	Except as set forth above, all other terms and conditons in the MOPA would be applicable.
If TVA agrees to this proposal, please indicate by signing in the space provided below and returning a copy of this letter to me via telefax at (713) 646-3490 no later than 5:00 p.m. CPT on July __, 2000 (the "Offer Expiration TIme").  If TVA signs and returns this letter on or before the Offer Expiration Time, EPMI will forward to TVA a draft Escrow Agreement for TVA's consideration.

Very truly yours,
Kevin Presto
Vice President

Tennessee Valley Authority
By:  	
Name:  	
Title: