This is yet another, tangible case of why price caps don't and can't help; 
they can and will only make matters worse.  Caps are a policy chainsaw when a 
scalpel is needed.  The result of the caps being imposed on QFs by Davis and 
the Legislature will be shut downs and bankruptcy, which will reduce supply 
and decrease reliability----the exact opposite of what the state needs to be 
doing.

FYI:  I listened in to Sokol's conference call yesterday re: court case 
freeing CalEnergy from the QF contract.  Sokol blasted Edison over and over 
(e.g., accumulated war chest of over $2 billion in cash).  Sokol said that, 
at least for the time being, this lessens the need for CalEnergy specifically 
to force an involuntary.  Be interesting to see if other QFs take similar 
tack.  Sokol also said that CalEnergy has sold the power to El Paso---lot's 
of press questions about price and where the power's headed (i.e., in our out 
of state).   He said he expects to get a "market price" from El Paso and that 
if the "prices are higher out of state, well......."

Best,
Jeff



	James D Steffes
	03/22/2001 10:16 AM
		 
		 To: Jeff Dasovich/NA/Enron@Enron, Sandra McCubbin/NA/Enron@Enron
		 cc: 
		 Subject: California Update 3/22/01

FYI.

----- Forwarded by James D Steffes/NA/Enron on 03/22/2001 10:16 AM -----

	Kristin Walsh/ENRON@enronXgate
	03/22/2001 08:20 AM
		 
		 To: John J Lavorato/ENRON@enronXgate, Louise Kitchen/HOU/ECT@ECT
		 cc: Phillip K Allen/HOU/ECT@ECT, Tim Belden/HOU/ECT@ECT, Mike 
Grigsby/HOU/ECT@ECT, Tim Heizenrader/PDX/ECT@ECT, Vince J 
Kaminski/HOU/ECT@ECT, Rob Milnthorp/CAL/ECT@ECT, Kevin M Presto/HOU/ECT@ECT, 
Claudio Ribeiro/ENRON@enronXgate, Richard Shapiro/NA/Enron@Enron, James D 
Steffes/NA/Enron@Enron, Mark Tawney/ENRON@enronXgate, Scott 
Tholan/ENRON@enronXgate, Britt Whitman/ENRON@enronXgate
		 Subject: California Update 3/22/01


? The legislature will meet and vote to repeal Section 390 of AB 1890.  This 
will reverse what the QFs get  paid from natural gas costs and replace it 
with the formula in the governor's current plan - 7.9 cents/kwh for 5-year 
contracts and 6.9 cents/kwh for 10-year  contracts.  According to sources, 
this is "locked in to pass."  It  will be implemented by a PUC order on 
Monday.
 
? The QFs met on this plan all day yesterday and have calculated what they 
would get paid.   This  plan would not generate enough money for many QFs to 
operate profitably.  At  least 2,000 MW of the total 5,407 MW of gas-fired 
QFs would be unable to generate  a positive cash flow and would have to 
either operate unprofitably or shut down.
 
? The QF community is responding with an increased militancy for an 
involuntary filing, according to sources.  The most aggressive QF after Coram 
Energy is David Sokol and Walter Scott of Mid-America Energy (based in 
Nebraska).  Sokol is described  by sources as "extremely aggressive." 
 
? An involuntary bankruptcy filing appears imminent.   Sources believes the 
trigger event will either be the legislative passage of the plan  tomorrow or 
the PUC order implementing the plan on Monday.