GREETINGS:

So, we're all happy that FERC finally made a decision.  Traders tell me the 
market has stabilized and people think much of the regulatory uncertainty has 
ended.  NOT SO FAST..... I am NOT an attorney -- but here are my current 
guesses.

ISSUE:  FERC has created a huge constitutional issue with the state of CA.  
The FERC has ordered the ISO to do something differently than what was 
specified in the state legislation, AB 1890.  The last time this happened, in 
late 1999 (on ISO and PX governance), the state reared its back -- and FERC 
caved in.  So let's not be sanguine about what FERC has done here.  Much will 
need to be done by Enron and others to bolster FERC.

THE COURTS:  The state could get its back up and decide to fight this.  The 
potential is that FERC will get political pressure to "settle", once a 
request for rehearing is submitted.  Remember --- this is ALL political.  
It's not about logic.  Last time, the state, through the Oversight Board, 
submitted a request for rehearing with FERC.  FERC told them to pound sand, 
so the EOB then filed in federal court to overturn the order.  This was 
"settled" when the state negotiated with FERC behind the scenes and FERC did 
a 180. (We have a court case pending on that order.)  If the state decides to 
go the rehearing route, I'm not too sure when they could initiate court 
action.  They could probably file for an emergency stay, but they tried that 
in the last court case and it was rejected.   

GOVERNOR:   A little has been trickling out.  Gov. Davis went to town at a 
press conference yesterday, talking about gouging generators and sending $6 
billion out of state.  He stated his unhappiness with the FERC not providing 
refunds.  He says his adminstration will continue its fight to have refunds 
ordered. His administration will "participate fully" in the FERC hearing on 
Nov 9.  The Governor believes that the state lost control of its transmission 
system when it passed 1890.  So, I could conceive of some legislation or a 
federal push to "give it back."  I don't think that would be ultimately 
successful, but it would likely create some wild times.

FEDERAL:  The press reported that U.S. Sen Feinstein will introduce a measure 
in the next few days to give FERC retroactive refund authority.

STATE LEGISLATURE:     State Sen Bowen has said she plans to hold a hearing 
in mid-month and will draft a "legislative response to the FERC proposal."   
Assemblyman Rod Wright met with about 30 people today (suppliers and 
utilities) to explore some issues.  He wants to take leadership of the issue 
and is supported by the Speaker of the House.  He plans legislative action.

CONSUMER ADVOCATES:  Press reports state that several consumer organizations 
are considering court action to get the refunds.

TIMING:  Soon and  sooner.  Hearings can happen any time.  The legislature 
returns in January and we can expect emergency legislation and a quick pace.  
Hold on to your hats!