Greetings:

Hope everyone had a pleasant 4th.

I've read the respective Burton and Hertzberg language on amending AB 1X.  
The Burton language looks cleaner and simpler, though there may be reasons to 
include some of the Hertzberg language, too.

I'm proposing to the group the following as potential amendments to the bond 
bill.  I would appreciate your feedback.  The amendments would be as follows:

Customers who were on Direct Access when DWR started buying power (Jan. 
17th?), and are still on Direct Access when the bill passes, should be exempt 
from paying for the bonds. 

In short, customers should not be forced to pay for power twice--once from 
their ESP, and once from DWR.  Since these customers receive power services 
from their ESP, they never consumed DWR power in the first place and it 
wouldn't be fair to require them to pay for it.

Customers who have been utility customers since DWR started buying power but 
subsequently switched to Direct Access should only pay for power provided by 
DWR that they actually consumed, no more and no less.  

For example, if a customer was a utility customer when DWR started buying 
power but switched to Direct Access on May 1st, then the customer would only 
be responsible for reimbursing DWR for power deliveries that took place from 
Jan. 17th thru April 30th.

I believe that we agreed on these concepts during the negotiations that took 
place over the past 4-5 weeks.  Or if we didn't explicitly agree during the 
talks, they seem to be principles on which we ought to be able to agree 
pretty easily now. And rather than leave the issue hanging, which can create 
unnecessary and costly uncertainty for customers, I suggest that we include 
very clear and simple legislative language in the bond bill clarifying what 
customers' obligations are.  Your thoughts are appreciated.

In addition, we have talked quite a bit about providing customers with 
incentives in the attempt to get California out of the energy hole that it 
finds itself in.  Providing (20KW and above) customers with an incentive to 
switch to Direct Access as soon as possible could 1) reduce the net short 
position that the state (and ultimately consumers) have to finance, thereby 
reducing spot purchases and price volatility,  2) reduce electricity 
purchasing costs, and 3) reduce the burden on the state budget.

With this in mind, I'm also proposing that the group consider an amendment to 
the bond bill that would exempt from bond charges any customer that switches 
to Direct Access by September 1st.

Finally, it seems odd that the language directing the PUC to suspend Direct 
Access is still in the bill.  If a dedicated rate component is created, that 
seems to eliminate altogether the need to suspend Direct Access.  And if 
that's the case, would it make sense to delete that language from the bill?

Look forward to your comments and working with you to get support for and 
passage of the "core/noncore" proposal.

Best,
Jeff