Hey its worth more than two cents, and I hear you exactly.  We will be busy
tonight, that is for sure!!!

-----Original Message-----
From: Jeff.Dasovich@enron.com [mailto:Jeff.Dasovich@enron.com]
Sent: Wednesday, January 03, 2001 4:52 PM
To: Kari Dohn
Subject: RE: Additional Materials



It's hard to disagree with the fact that 1) the utilities are the ones that
cut the deal they're living with and 2) they took all of the "stranded
cost" money that consumers paid them and invested it in other states and
countries.

But you can only buy for 10 cents and sell for 5 cents for so long before
creditors turn off the spigot.  Difficult to see how the spigot stays on
with the draft decision issued today.  (See story attached, below.)

With bankruptcy, the only one making any decisions is the judge, and while
some see benefits to that, seems to us that from a political, financial and
commercial perspective, bankruptcy creates many more problems than it
solves.

That said, we're extremely sensitive to the politics of rate increases.
But if the increases are subject to refund, then decision makers can buy
themselves some time by erring just slightly to the high side of a rate
increase, which could fend off the ratings agencies and provide additional
opportunity over the next 90 days or so to scrutinize the utilities claims
and come up with comprehensive solutions to the bigger problems.

Well, you got my two cents.  Sorry about that.

Best,
Jeff
****************************************************************************
**********************

Late afternoon 1/3/01 news:


USA: Calif utility ratings may fall too far on 7-15 pct hike.
By Jonathan Stempel

01/03/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, Jan 3 (Reuters) - Bankruptcy may loom and the credit ratings of
the two largest California electric utilities will likely fall too far if
that state's Public Utilities Commission awards them an interim rate hike
of 7 to 15 percent, analysts said Wednesday.

In a draft decision on Wednesday, the CPUC proposed an immediate hike of 9
percent for residential customers of Pacific Gas & Electric Co. and
Southern California Edison, and hikes of seven to 15 percent for various
business customers.

The CPUC commission is expected to issue a final decision on Thursday.

"It forces the utilities and their creditors to be limbo dancers, and
skilled limbo dancers at that," said Shawn Burke, head of U.S.
investment-grade research at Barclays Capital.

PG&E and SCE had requested respective rate increases of 26 percent and 30
percent, a hike that would help them avoid imminent bankruptcy.

The utilities have also asked the regulators to remove a freeze on retail
rates imposed under California's 1996 law that deregulated the state's
electricity market.

On a day when most stocks roared ahead after the Federal Reserve announced
surprise interest rate cuts, investors beat down the stocks of Pacific
G&E's parent, San Francisco-based PG&E Corp. , and SoCal Edison's parent,
Edison International .

PG&E shares closed Wednesday on the New York Stock Exchange at $17, down
$2-9/16, or 13.1 percent, while Edison International shares closed at
$12-1/4, down $2-3/4, or 18.3 percent, on the Big Board.

Bond quotations were not immediately available for the utilities' bonds,
which in recent weeks have traded like junk.

Pacific G&E and SoCal Edison were banking on a big rate hike to allow them
to pass on some of their soaring wholesale power costs to consumers.

The utilities, which operate under a rate freeze, have accumulated more
than $8 billion in unrecovered costs since wholesale power prices started
skyrocketing last summer amid a worsening electricity shortage in the
state. They claim they are running out of money due to the price freeze,
and have billions of dollars of bills coming due in the next six weeks.

Central to their concerns is whether credit rating agencies Moody's
Investors Service and Standard & Poor's will cut their medium investment
grades to junk status.

"No one knows for sure, but if we consider the average rate hike is only
about 10 percent, it will be difficult for the companies to maintain
investment-grade ratings," said Dorothea Matthews, a fixed-income electric
utilities analyst for Deutsche Banc Alex. Brown.

The utilities have already been unable to tap short-term capital markets
because of their precarious financial state.

Downgrades to junk, which the agencies have already threatened, would
cement the door shut to these markets, and cause the utilities to default
on some of their loans.

Late Wednesday, PG&E Chief Executive Gordon Smith said the commission's
proposed hikes could jeopardize his utility's future loans.

Even a downgrade to the lowest investment grades - "Baa3" for long-term
debt and "Prime-3" for short-term debt from Moody's, and "BBB-minus" and
"A3" from S&P - would make the going very difficult for the utilities. The
reason: short-term debt markets are often closed to companies with those
ratings.

"Unless this process allows the rating agencies to keep 'A2/P2' ratings on
the short-term debt of both companies, then this process has largely been a
waste of everyone's time," said Burke.

Still, he said, "there is a reasonable chance, despite today's weak
recommendation, that the situation can be salvaged with mid-'triple-B'
ratings, which would allow a lifeline to conventional sources of
liquidity."

Moody's and S&P were not available for comment.





Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved




Kari Dohn

<Kari.Dohn@GO        To:     "'Jeff.Dasovich@enron.com'"

V.CA.GOV>            <Jeff.Dasovich@enron.com>

cc:

01/03/2001           Subject:     RE: Additional
Materials
06:30 PM








thank you so much.  so the news aint great for utilities?

-----Original Message-----
From: Jeff.Dasovich@enron.com [mailto:Jeff.Dasovich@enron.com]
Sent: Wednesday, January 03, 2001 2:14 PM
To: Kari Dohn
Subject: Additional Materials



Greetings Kari:

Forgive the delay.  Much going on today, PUC draft decision in particular.
The draft does not look promising for the utilities' financial position.

Attached are our comments on the Governor's Proposals and some more detail
on the demand-reduction proposal.  We continue to work on the Nord Pool
research for you and will turn that around as quickly as we can.

Again, don't hesitate to contact me if there's anything else I can help
with, or if there's anything else that you need. (415.782.7822)

Best,
Jeff

(See attached file: Comments on Governor's Proposals 010301 .doc)(See
attached file: Demand buy-down proposal.doc)