Enron Power Marketing, Inc.
	P.O. Box 4428
	Houston, Texas 77210-4428
	(FAX) (713) 646-2491	

March [  ],28, 2001		  		

Department of Water Resources,
A division of the State of California
3310 El Camino Avenue, Suite 200
Sacramento, CA  95821
Attention:	Mr. Tom Hannigan
		Director

Fax No.  (916) 574-2785

AMENDED AND RESTATED CONFIRMATION LETTER

This letter shall confirm the agreement reached on March [  ],28, 2001 between the California Department of Water Resources (“CDWR”) and Enron Power Marketing, Inc. (“EPMI”) regarding the sale of CAISO Firm Energy under the terms and conditions that follow (the “Transaction”).  This letter amends and restatesconstitutes the definitive agreement reached by the Parties with respect to the exercise by EPMI of the "Option" contained in its entirety that certain confirmation letter, dated February 22, 2001,2001 (the "Prior Confirmation"), confirming the agreement reached on that date between EPMI and CDWR regarding the sale of CAISO Firm Energy.  

PART 1

Seller:	EPMI	

Buyer:	CDWR	

Type of Commodity:	
CAISO Firm Energy	

Term:	FebruaryApril 24,1, 2001 through March 31, 2001.2006. 	

Price:	$265127/MWh	

Quantity:	200MW   Hour Ending (HE) 0700 through HE 2200 (16 hours each day), Monday through Saturday only, excluding NERC Holidays; Pacific Prevailing Time.	

Delivery
Point(s):	NP-15 as currently defined, until such time that the definition of NP-15 changes or the zone ceases to exist, in which case the Delivery Point shall be that zone, or any physical location or bus, that reasonably resembles, in terms of liquidity and homogeneity and physical location, PGE3, and specifically excluding the proposed “North Bay” and “Greater Bay Area” zones identified in Figure 1 on page 10 of Appendix H (located at http://www.caiso.com/docs/09003a6080/06/ec/09003a608006ec61.pdf) to the document entitled “Congestion Management Reform Recommendations” (Draft Proposal) dated July 28, 2000 issued by the California Independent System Operator and available on its official website at http://www.caiso.com/docs/09003a6080/06/ec/09003a608006ec44.pdf.	

Scheduling:	EPMI Real Time Operations: 1-800-684-1336	
		
Special Conditions:	Throughout the term of Part 1 of this Transaction, Buyer shall pay Seller on a rolling seven-day cycle on the following dates:

March 2, 2001
March 9, 2001
March 16, 2001
March 23, 2001
March 30, 2001
April 6, 2001

In the event Seller exercises the Option described in Part 2, the payment procedures set forth in Sections 6.1 and 6.2 of the Master Agreement (defined below) shall apply with respect to any energy deliveries made on or after April 1, 2001 pursuant to Part 2, except as otherwise provided in Section 8.1(d) of the Master Ageement.

PART
Special 2Conditions: 

		EPMI shall have an exclusive, unilateral right, but not the obligation (“Option”), to extend the term of  the Transaction to an end date of March [31], 2006 at a price of $127/MWh, exercisable by EPMI in writing at any time before 5:00 p.m. on March 28, 2001.  This Option is entirely at EPMI’s discretion, such discretion to be without any limit whatsoever.  For clarity, this expressly means that EPMI may elect to not exercise its right to enter into the extended term for any reason whatsoever, including but not limited to credit related reasons, or for no reason.  If EPMI elects to exercise its Option, then EPMI shall credit CDWR on the nextfirst invoice issued by EPMI hereunder (and, to the extent necessary, on subsequent invoices) with an amount equal to the difference between the Part 1 Price and the Part 2 Price ($138) times the number of megawatt hours delivered pursuant to Part 1.the Prior Confirmation for the period commencing February 24, 2001 up to and including March 31, 2001.

		In the event that EPMI exercises the Option to extend the Term of the Transaction, EPMI shall have a unilateral right (the “Special Termination Right”), exercisable upon notice to CDWR and entirely at EPMI’s discretion, such discretion to be without any limit whatsoever, to terminate this Transaction and the Agreement (without either Party being entitled to any Termination Payment or other damages on account thereof) at any time on or prior to the earlier of (hereinafter, the “Outside Date”) (i) [September 30, 2001] and (ii) seven (7) days after the date on which CDWR either (A) issues Bonds with a Credit Rating equal to or better than Investment Grade and in an aggregate principal amount of at least $2,000,000,000 or (B) secures a rating for the Fund from botheither S&P's andor Moody's with respect to the ability of the Fund to satisfy CDWR's obligations to pay for all power purchased by it pursuant to Sections 80100 et seq. of the Water Code and all other obligations thereof, substantially equivalent to or better than Investment Grade.  For clarity, this expressly means that EPMI may elect to terminate this Transaction and the Agreement at any time on or prior to the Outside Date for any reason whatsoever, including but not limited to credit related reasons, the failure of CDWR to issue the Bonds or secure a rating for the Fund in accordance with the foregoing or for no reason.  In the event that EPMI exercises the Special Termination Right, this Transaction and the Agreement shall terminate at the end of the 3rd day after the delivery by EPMI to CDWR of its notice to so exercise the Special Termination Right, provided that CDWR and EPMI shall each remain obligated to pay for or provide credit for, as the case may be, amounts otherwise due hereunder with respect to power delivered or credits due prior to any such termination.

		CDWR agrees to use its reasonable best efforts to deliver, or cause to be delivered, to EPMI, no later than 5 days afterprior to the Outside Date, a legal opinionopinions from the Attorney General of the State of California or from other counsel reasonably acceptable to EPMI, which opinionopinions shall be in form and substance reasonably satisfactory to EPMI, substantially to the effect, among other things, that:  (i) CDWR is duly organized, validly existing and in good standing under the laws of California; (ii) CDWR has all regulatory authorizations necessary for it to legally perform its obligations under this Transaction and the Agreement; (iii) the execution, delivery and performance of this Transaction and the Agreement are within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law rule, regulation, order or the like applicable to it; (iv) this Transaction and the Agreement and each other document executed and delivered in accordance with this Transaction and the Agreement constitute its legally valid and binding obligations enforceable against it in accordance with their terms (subject to applicable bankruptcy laws and other similar laws affecting creditors' rights generally, and to general principles of equity); (v) CDWR is entitled to recover, as a revenue requirement, amounts necessary to satisfy its payment obligations under (A) this Transaction and the Agreement, including any Termination Payment,  (B) other agreements for power purchased by CDWR pursuant to Section 80100 et seq. of the Water Code (including any termination payments required thereunder) and (C) the Bonds; and (vi) provided that CDWR satisfies its obligations to furnish its revenue requirements to the CPUC from time to time, the CPUC is required under the CDWR Revenue Order to approve and impose, either as part of the California Procurement Adjustment pursuant to Section 360.5 of the Public Utilities Code or as additional rates, rates sufficient to recover CDWR’s revenue requirements on a timely basis.  If, notwithstanding theProvided that CDWR shall have used its reasonable best efforts of CDWR,to have obtained the foregoing opinion cannot be obtained from the Attorney General of the State of Californiaopinions, CDWRit shall not be permitted to substitute either (i)considered an opinionEvent of Default on the general counselpart of CDWR or (ii) an opinion from a nationally recognized counsel with experience in energy and California regulatory matters selected bythe event that CDWR and reasonably satisfactoryfails to EPMIso obtain such opinions.

		Upon exercise of the Option by EPMI and as of the Outside Date, each and every representation and warranty of the Parties contained herein and in the Agreement shall be deemed repeated.

CDWR has determined, in accordance with Section 80110 of the Water Code, that the prices for both Part 1 and Part 2 of this Transaction are just and reasonable and will be paid in full in accordance with the terms set forth herein.

“CAISO Firm Energy” means that the EPMI shall sell and CDWR shall purchase a quantity of energy equal to the hourly quantity without Ancillary Services, as defined in the applicable tariff and protocol provisions of the California Independent  System Operator (as amended from time to time, the “Tariff”), that is or will be scheduled as a schedule coordinator to schedule coordinator  transaction pursuant to the Tariff and for which the only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the Tariff).

Neither Party shall disclose the terms or conditions of this Transaction or the Master Agreement to a third party (other than the Party’s and its affiliates’ employees, lenders, counsel, advisors or accountants who have a need to know such information and have agreed to keep such terms confidential) except in order to comply with any applicable law, order, regulation or exchange rule; provided, each Party shall notify the other Party of any proceeding of which it is aware which may result in disclosure and use reasonable efforts to prevent or limit the disclosure to the extent permitted by law. The Parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with, this confidentiality obligation; provided, all monetary damages shall be limited as set forth in the referenced Master Agreement.

This confirmation letter is being provided pursuant to and in accordance with the Master Power Purchase & Sale Agreement between CDWR and EPMI dated March [  ],28, 2001 (the “Master Agreement”), which amends and restates in its entirety that certain Master Power Purchase & Sale Agreement between EPMI and CDWR, dated as of February 22, 2001, and constitutes part of and is subject to all of the terms and provisions of such Master Agreement. Notwithstanding any contrary provisions in the Master Agreement, any conflict between the terms set forth in this confirmation letter and the Master Agreement shall be resolved in favor of the terms set forth in this confirmation letter. Terms used but not defined herein shall have the meanings ascribed to them in the Master Agreement.

Please confirm that the terms stated herein accurately reflect the agreement reached on March [  ],28, 2001 between you and EPMI by returning an executed copy of this letter by facsimile to EPMI at (713) 646-2491. Your response should reflect the appropriate party in your organization who has the authority to enter into this Transaction. If you have any questions please call (713) 853-1886.

CALIFORNIA DEPARTMENT OF WATER RESOURCES	ENRON POWER MARKETING, INC.	

By:	________________________________	By: 						

Name:	________________________________	Name:	 					
				
Title:       ________________________________	Title:  						

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