Been on two panels in the last two weeks with Florio--most recent yesterday. 
Dan Richard of PG&E was also on yesterday's panel.  Mike has now come so far 
as to push the "core/noncore" split a la the gas industy publicly (if you 
just wait long enough, people come around).  Dan Richard did not object.  I 
am pretty suspect about PG&E, though.  Dan Richard said things like:

I'm one of the people in my company who believes that, over time, the utility 
should exit the procurement function, but many policy makers want PG&E to act 
as a "quasi-governmental" body offering reliable, low cost service to small 
customers.
I don't think anyone wants anyone's mother to be thrown to the competitive 
market willy nilly.
People have to understand that the large customers are going to take all of 
the "good" power, leaving the "dregs" for small customers.

While I'm skeptical of PG&E--Dan said what he knew people wanted to hear but 
there was little conviction behind the words--there is certainly an opening 
that we should try to exploit.

In addition, Florio is now publicly agreeing pretty strongly that the gas 
model for utility procurement is one that merits a heck-of-a-lot of 
attention, i.e., set a benchmark, get the CPUC out of the way, and let the 
utility live or die by the benchmark.

There's daylight among the stakeholders, but a very large amount of 
uncertaintly regarding whether the administration, its appointees, and/or the 
Legislature will get on board.

Best,
Jeff




	Mona.L.Petrochko@enron.com
	11/13/2000 06:37 PM
		 
		 To: Susan.J.Mara@enron.com, jdasovic%.enron.com@enron.com, 
Sandra.McCubbin@enron.com, Joseph.Alamo@enron.com, Marcie.Milner@enron.com, 
Paul.Kaufman@enron.com, Lysa.Akin@enron.com, Mary.Hain@enron.com, 
Alan.Comnes@enron.com, Roger.Yang@enron.com, Harry.Kingerski@enron.com
		 cc: 
		 Subject: ARM met w/ Mike Florio

ARM had a good meeting with Mike Florio, TURN, on Friday on defining the
utilities default role and more rationale to the forward contracting.  My
walk away was as follows:

1.  TURN agrees with the big guys out first, and the utilities default role
defined to residential and small commercial customers.  Where you draw the
line (20 kW, 50 kW or 100 kW) is probably debatable.

TURN thinks SDG&E will be receptive, PG&E is thinking along similar lines
and that SCE is most resistant, but could be coaxed.

He thinks that CMTA/CLECA probably don't like it, but they will be in the
minority.  He met w/ John Stevenson, Governor's staff, who was receptive,
as was Carl Wood.

2.  He agreed that you need definition of the utilities default role to
provide direction on forward contracting.  Although, we all recognized that
the rules around reasonable behavior were preventing utilities from
entering into contracts.  We discussed up-front reasonableness.  Mike
seemed to be warming to the virtues of a competitive bid process in
determining a reasonable price.

3.  The idea of competitive default provider may need some proving.  He
felt SDG&E was the best place to start.  Michael Shames, UCAN, seems
interested in the idea.

4.  An important component of default service, at least initially, is
certainty of price for small consumers.  We discussed different ways of
providing certainty.  The utility could set a price, up front, and have to
manage its costs to meet that price.  No balancing account.  Utilities at
risk/reward.  We also discussed ways to keep the utilities honest on the
price.  One way is competitive default provider.  Another way is
competitive bid for portions of its portfolio.

5.  Discussed three components of utility procurement:  existing
generation, forward contracts and spot purchases.  Existing generation
would be valued.  Question about whether market prices would establish
price of output or some interim revenue requirement, as proposed by SCE on
its hydro resources.  Mike also seems to have softened over future
divestitures so long as there is some kind of interim buy-back contract
with the utility.

Will be at AB 1890 Implementation Group Meeting Tuesday and Wednesday
talking to other parties.