Jeanne - you shouldn't compromise Enron's prior statements on ending the rate 
freeze.  The most important thing is that we not get a retroactive end of the 
rate freeze (retroactive to any time before the date of the order).  We may 
also accomplish this through legislation.

Regarding the book vs. market valuation, it is less important that we argue 
for market or book than it is we should clarify for the commission how and 
why it should be consistent with the new legislation.  If new legislation 
occurs and means that utility generation will be priced at cost for 10 years, 
then everyone needs to realize that is a fundamentally different construct.  
DA Customers are not getting the value of these plants through the valuation 
process so they must have access to that value through the access to retained 
generation approach. If cost based rates are not legislated, market valuation 
shoud proceed.  What we don't want is for them to legislate cost-based rates 
and then forget about the value being stripped from DA.

Also, seems like it could be a good thing to point out that if they do 
declare an end to the rate freeze, if it is effective before new replacement 
legislation is enacted, they've only created another quagmire.   I'll call to 
discuss.



	JMB <JBennett@GMSSR.com>
	02/26/2001 10:32 AM
		 
		 To: "'Bob Frank (E-mail)'" <robert.frank@enron.com>, "'Harry Kingerski 
(E-mail)'" <Harry.Kingerski@enron.com>, "'Jeff Dasovich (E-mail)'" 
<jdasovic@enron.com>, "'Sue Mara (E-mail)'" <smara@enron.com>, "'Tamara 
Johnson (E-mail)'" <tjohnso8@enron.com>, "'sstoness@enron.com'" 
<sstoness@enron.com>
		 cc: 
		 Subject: Brief in Rate Stabilization Proceeding

Despite the fact that the hearings will probably continue into Wednesday of
this week, the briefs in Phase I of the Rate Stabilization Proceeding are
still due this Friday the 2nd.  One of the issues before the  ALJ is the use
of interim versus final market valuation to end the rate freeze.  I am very
hesitant to say that the rate freeze cannot end on the basis of a Commission
approved interim valuation as Enron has, in previous proceedings, taken the
position that it can.  Please let me know right away if you feel different
about this.  Along these same lines, the issue of the value of the assets is
somewhat at play (at least on an interim basis).  Do we want to take a
position that the assets need to be market valued (rather than book) thus
increasing the rate base for the purpose of cost of service regulation which
the assets are now under? Increased generation rate would mean an increased
DA credit. However, it may also hurt our claim that we should get a piece of
the retained generation.  Again let me know as soon as possible about your
position. 

Jeanne Bennett