Greetings Mark:

Here is the latest.  

ENA signed a short-term deal (5 -week term, I believe) with DWR that goes 
through the end of the month, at which time we have the option to extend the 
deal to a five-year term.  We are discussing other longer-term deals, too.

As Steve points out, we've had serious concerns regarding DWR's 
creditworthiness.  (DWR, the Dept. of Water Resources, is the state agency 
that Davis made the purchaser of power when the utilities hit the financial 
skids a few months ago and the market stopped selling them power.)

The problem has been simple and significant---while our brilliant Governor 
and Legislature gave DWR the authority to buy power on behalf of the 
cash-strapped utilities, they neglected to t spell out how DWR would recover 
its costs of buying the power.

Based on comments from us and other suppliers regarding the creditworthiness 
issue, the California PUC issued an order last week establishing that 1) the 
PUC would indeed pass DWR's power costs through to ratepayers and 2) the PUC 
would NOT second-guess (i.e., impose "reasonabless" standards) on any 
contracts signed by DWR as a condition of passing the costs through to 
ratepayers.

With the CPUC decision (and other language that ENA's negotiated into the DWR 
contract), ENA is close to being comfortable signing the 5-year deal, even in 
the face of the FERC order.  That's predominantly due to the fact that the 
power price in the 5-year deal would come in well under the $150/MWH 
threshold that FERC has set up for any sort of "refund review."  But other 
things could crop up between now and the exercise date that could muck things 
up. I'll keep you posted on developments  as they transpire.  

The big problem (as Steve notes) is that the State is on the verge of (some 
say hell bent on) taking over the entire electricity industry in California 
in perpetuity.  Our original proposal focused on getting price volatility and 
the utilities' financial position back under control.  Our contracting 
proposals have always been couched in the context of a temporary, stop-gap 
measure.  That is, the state would do the minimum amount needed via contracts 
to stabilize prices while simultaneoulsly doing what was necessary to get 
de-regulation back on track in California.  And once the situation had been 
righted, the State would as soon as possible exit the industry and let the 
market step back in.  Unfortunately, command-and-control, anti-deregulation 
policymakers have taken hold of the agenda (with the blessing, seemingly, of 
the Governor), and are moving the state toward a "takeover" response.  That's 
what we're actively opposing.

If you have any questions, don't hesitate.

Best,
Jeff