Jeff,

Sorry I was unable to make the call yesterday.  Thanks for the summary.  My
comments and questions are indicated below.

Please fax a copy of Plan B to be at 713 767 6677.


You suggest starting the "process" in Sacramento next week.  I'm not
sure exactly what this means.  Are we saying we will have a proposal
or that we will be advocating a process/forum to get all the right
parties at the table?
Did we set a time for the next call on Friday?
With regard to the Issues list, here are a few extra items:
need to make clear that real price signals should be sent to all
sectors (not just those that wouldn't vote for Davis anyway) as
soon as possible
I cannot imagine a situation in which the IOUs are returned to
financial stability within 3-6 months; my guess is that it will
be at least a year
if IOUs are returned to the procurement role, we need to make
sure that they have the appropriate risk management tools
(ability to enter forward contracts, options, etc.)
if IOUs are returned to the procurement role, we also need to
have assurances that the situation we have today won't happen
again;  for example, if the state assigns the CDWR contracts to
the IOUs and three years from now the market price is less than
the contract price, what assurances does anyone have that the PUC
will not try to make the IOUs absorb the difference
If we want to go to a core/non-core approach, why do we need to
wait 18-24 months;  it seems to me that we could start that
process now
As for legal claims and investigations, we need to make clear
that we want to resolve all state and federal claims;  the civil
claims present a different set of challenges for resolution
as for discounts on receivables, I'm not ready to commit one way
or another; however, if there are discounts they must apply to
all market participants - not just the ones that Davis can get to
the table.


Lynn





Jeff.Dasovich@enron.com on 05/14/2001 08:47:31 PM

To:   sryan@aesc.com, hoffman@blackstone.com, bbailey@duke-energy.com,
Lynn.A.Lednicky@Dynegy.com, john.harrison@elpaso.com,
rachael.king@elpaso.com, clark.smith@elpaso.com, skean@enron.com,
tom.allen@mirant.com, sonnet.edmonds@mirant.com,
randy.harrison@mirant.com, alex.goldberg@williams.com
cc:   Maureen.McVicker@enron.com

Subject:  Summary of Today's Call/Agenda for Tomorrow's Call


Greetings:
n order to keep everyone in the loop, the folks on today's call wanted to
send out a brief summary of the call for the benefit of those who couldn't
make it.  Apologies for any omissions, inaccuracies, etc.  Others who were
on the call please chime in if I've gotten anything wrong, or missed
anything.

Best,
Jeff

SUMMARY
Enron, Duke, El Paso and Williams were on the call, as was Michael
Hoffman of the Blackstone Group (the Governor's financial advisors).
On the subject of how the group would organize itself, it was agreed
that the calls would be open to anyone who wanted to participate.
A smaller group consisting of Duke, El Paso, Enron, and Williams would
take the lead on walking the halls of Sacramento, meeting with policy
makers, and advocating whatever plan the group develops.
Folks agreed that achieving a comprehesive solution requires a tangible
process; that is, the principals need to get in a room, face to face,
for however long it takes to work out a resolution.
It was agreed that the process should start no later than the beginning
of next week, and that it should take place in Sacramento.
It was decided that the Legislature and the Attorney General needed to
be brought into the process as soon as possible, i.e., next week.
There was some discussion regarding the release today of "Plan B."  Plan
B is a plan proposed by Democratic and Republican legislators as an
alternative to the MOU that the Governor struck with Edison.  After that
call I received a copy of "Plan B."  If you'd like a copy please send me
your fax number.
Folks on the call agreed to have the next "supplier-only" call-in
meeting on Friday.
Finally, Michael Hoffman said that they are hoping to have a "ratings
agency level" presentation prepared by the end of the week.  The goal of
the presentation is to reassure capital markets that the bonds the state
seeks to issue are solidly backed by retail rates.

The Agenda for Tomorrow's Call with the Governor's Staff
Item #1:       The Credit Issue
Michael Hoffman said that the Governor's office wants to start
tomorrow's meeting discussing the creditworthiness issue.
Hoffman said that the Governor's folks are hoping to have completed by
the start of tomorrow's meeting a draft of an agreement between the
California PUC and CDWR.  The agreement is designed to ensure that DWR
gets paid for power services delivered.
If the draft is ready, they'd like to discuss on the call tomorrow.

Item #2:       Identify the Components of a Comprehensive Solution.
It was agreed that our group should put on the table at tomorrow's
meeting the universe of issues that need to be included in a
comprehensive solution.
Enron was asked to take a first stab at what those components are.  The
following is a brief outline, which is not intended to be definitive,
but a starting point for discussion.
Utility creditworthiness
retail rates must reflect costs
Increase supply
streamline and otherwise reform the siting process
Decrease demand
establish real-time pricing
implement demand buy-down and other conservation programs
Create a real market
Remove the State from the power-buying business as soon as possible
(e.g., once new rates are in place and utilities are returned to
creditworthiness; approximately 3-6 months)
Return the procurement role to the utilities
Reinstate Direct Access immediately for all customers
Within 18-24 months, create a "core/noncore" market structure for
electricity, similar to California's market structure for natural
gas
Keep the industry in the hands of the private sector
Reject proposals calling on the State to take over transmission,
generation, etc.
Resolve outstanding legal claims, investigations, etc.
Resolution requires certainty and prompt payment (understanding
that discounts on receivables is on the table for discussion)