Dear SVMG Members:

As you know, the State Legislature and Governor are working almost solely on
Energy Legislation during this special session of the State Legislature.  As
an organization, SVMG is working to provide feedback on the more relevant
bills to ensure that Silicon Valley's voice is heard in this critical
debate.

Since the process is moving so quickly, with bills being voted on daily, the
SVMG Working Council and Operations Committee approved a mechanism so that
we could provide a timely response to key pieces of legislation.  A special
Task Force of Energy Experts from Member Companies, and several of our
seasoned policy professionals from member firms, are meeting weekly to
review bills and respond.  With that in mind, SVMG's actions to date on key
bills appear below.

I would like to offer my special thanks to Derek Naten of Roche for Chairing
our Energy Legislation Task Force, and each member of his team for the
significant amount of time they are investing in this effort.

If you have any questions or comments on the bills referenced below, or
SVMG's positions to date, please let me know.

This information also appears on our web site at www.svmg.org

Sincerely,

Carl

SVMG Positions on Key Energy Legislation
Energy Legislative Subcommittee
March 22, 2001

State Legislation

There are more than 170 bills in the extraordinary session focused on energy
reform.  The legislative subcommittee recognizes that there are very few
that are viable in the current climate.  Furthermore, of the principle
vehicles for fundamental change (SBX 27, ABX 18 et. al.), there is usually
so much flux in the process as to make it difficult to respond except in
principle (e.g. oppose bills where the state takes over transmission lines
as it commits the state as utility for many years and impedes market
restoration).  For that reason, the LS has recommended SVMG jointly draft a
letter expressing principles and criteria for assessing and responding to
legislation, primarily focused on the goal for the state to develop a vision
for it,s energy future (i.e. total reregulation or deregulation with direct
access and customer choice; incentivize private money to primarily fuel
infrastructure improvements) and a step-by-step blueprint to carry out the
vision.  We also want to recommend a consolidated or omnibus approach to
streamline legislative resolution and eliminate duplication and confusion.
However, there are some key bills on which we have taken a position:

ABX 48 (Migden)   --Community Aggregation    -- Position:  Oppose "pro rata
share" language

AB 48X authorizes any municipality to aggregate the electrical load of
interested electricity customers within its borders.  The bill also includes
a provision, however, [section 4(i), p. 10, line 19] that entitles every
municipality to "a  pro rata share" of the energy efficiency and renewable
energy funds contributed by its customers to California's "public benefits
programs" (at least $360 million annually, funded through a small surcharge
on utility bills).  Provides shared administration of EE programs between
municipality and utility and provides for sale of street lighting at book
value.

ABX 18 (Hertzberg)   -- Solvency of Utilities, State -- Position:  Watch

This is the vehicle for the Governor,s plan to address the utility,s
insolvency. Waiting for major text changes.  SVMG is very concerned about
approaches floated for this bill, particularly state purchase of the
Transmission grid and the risk to politicize electricity delivery.  Our
message is that we prefer paying for the undercollection through rates
shared by all customers rather than through the tax base.  But if the State
is determined to own the grid SVMG recommends that California become a
member of a Regional Transmission Organization (RTO)

ABX 31 (Wright)  --Interruptibles Program ---Position:  Support

Requires the CPUC to adopt by April 30, 2001 regulations to permit demand
metered customers to participate in energy and ancillary services markets of
the PX and ISO; allows for the continued operation of interruptible programs
with heavy industrial customers until 12/31/03 and provides for an opt-out
in the event rate increases above the system-wide average are imposed; and
requires the CPUC to implement a Bridge Interruptible Program for customers
who have met their annual cap hours or events of curtailment.

SBX 47 (Batten/Keeley) -- Restructure Q F Contracts--Position:  Support

Restructures QF contracts to long-term from approximately 17 cents per
kilowatt/hour to approximately 9 cents/kwh and additionally enables.  Many
QF facilities are off-line because of the high price of natural gas.  This
allows QF facilities to sell power onto the market to defray high natural
gas costs.

The following Sher bills are conjoined

SBX 5 (Sher))   -- Conservation Programs -- Position:  Support
Appropriates $1,026,500,000 from the General Fund to implement various
energy efficiency programs, CARE and LIHEAP funding and new generation
initiatives.

SBX 28 (Sher)    Facilitates siting of Power Generation Facilities -
Position:  Support
Requires the Air Resources Board (ARB) to implement an expedited retrofit
program for generation facilities; requires the ARB to implement a program
to identify emission reduction credits; expedited siting process for standby
facilities and distributed generation as well as air pollution retrofit of
existing plants.  Final report of CEC is to include discussion of any public
benefits from new facility including economic, environmental and reliability
benefits from repowering of facility.

ABX 32 (Nation)   -- Tiered Residential Rates/Proportional -- Position:
Support

Requires the CPUC to establish a 3-tier rate structure (3rd tier at 200% of
baseline). Also provides CPUC to ensure installation of time of use meters
for at least 20% of non-residential customers. Establishes proportional
burden of rate increases between residential and non-residential customers
(no cross-subsidization of rates).

SBX 18 (Escutia)   --Core/Non-Core customers for State Power  -- Position:
Oppose

Dedicates retained generation to serve core customers: limit core at 500kW
svc.  Concerned that non-core (larger employers) will be left to fend for
themselves to buy on the spot market.  This bill would hurt job providers
and their workers throughout California, which, in turn, could severely
undermine the California economy.

ABX 44 (Cohn)   -- Demand Management Programs -- Position:  Support

Provides additional $25 M for peak electricity demand programs called for in
AB 970 of last year as modeled on the Blackout Busters approach.