April 25, 2001

Ms. Elizabeth Sager

Re:  Agreements applicable to the period in which the parties are negotiating a settlement and seeking Bankruptcy Court approval of the same.

Ms. Sager:

This letter confirms the gist of certain agreements reached orally between Enron and PG&E representatives at this morning's meeting.

First, Enron Power Marketing, Inc. (“Enron”) agrees to stay the provisions of section 5.5 of the October 9, 2000 Master Power Purchase and Sale Agreement (“Agreement”) between Enron and PG&E including actions to be taken by PG&E with respect to the calculation of the Termination Payment and PG&E’s objection to Enron’s calculation thereunder.  This stay shall remain in effect until either (i) the Bankruptcy Court in PG&E’s pending Chapter 11 case has entered a final order approving the parties’ agreement on the amount of the Termination Payment or (ii) the Bankruptcy Court or another court having jurisdiction has entered an order determining the amount of the Termination Payment.

Second, Enron agrees to maintain in full force and effect all five letters of credit with respect to its obligations under the Agreement (including the letters of credit from Banca di Roma, in the amount of $7,000,000; from Banca Commerciale Italiana, in the amount of $5,750,000; from Bayerische Hypo-und Vereinsbank AG, in the amount of $30,000,000; and from Banca Nazionale del Lavorno, in the amounts of $44,000,000 and $13,500,000) to assure payment by Enron of the applicable Termination Payment.  Enron agrees to provide PG&E extensions of each letter of credit on or before the 15th day of each month, or next business day if the 15th falls on a weekend or holiday.  Enron will continue to extend the letters of credit in this manner each month until either condition (i) or (ii) set forth in the preceding paragraph has occurred and PG&E has received the full amount of the Termination Payment, if any.  Notwithstanding the foregoing, the parties may agree to reduce the number and total dollar amount of the letters of credit to more closely match the agreed-upon amount of the expected Termination Payment.

Third, Enron agrees to execute Master Agreements with PG&E for gas deliveries to PG&E by Enron Canada and Enron North America (if that Master Agreement has, in fact, been terminated by Enron) and to enter into term gas sales to PG&E by each entity under those Master Agreements on commercially reasonable terms.

Finally, PG&E and Enron agree to negotiate in good faith to determine a fair and reasonable Termination Payment amount and to arrive at reasonable amounts for other claims Enron may have against PG&E before the bankruptcy court.

PG&E would like to receive assurance that the terms of this e-mail are acceptable to Enron; however, because I have not yet received your mailing address, I would like to use this e-mail and your reply to provide that assurance at the earliest possible time.  I intend to send a hard copy of this letter for your countersignature when your address is available to me.

Thank you.

Sincerely,

Lawrence C. Witalis