Jeff -- thank you so much!  Phew, for this minute!  One never knows minute
by minute.

Re:  securitization, I don't think the exact form has been decided in terms
of legislation, but its fair to say there are very active discussions at the
highest level regarding the best way to do this (with good support, between
us, it appears).  All major parties will need to be supportive.

-----Original Message-----
From: Jeff.Dasovich@enron.com [mailto:Jeff.Dasovich@enron.com]
Sent: Thursday, January 04, 2001 5:29 PM
To: Kari.Dohn@GOV.CA.GOV
Subject: PennFuture's E-cubed -- Price, Policy and Misperception



Greetings, Kari.

Today's installment includes:

Background on Nord Pool
Information on the status of de-regulation in Pennsylvania.

The rumors regarding securitization of utilities' power purchase costs had
a very positive effect on the utilities' stock today.  Congratulations.
There is conflicting information floating around, though.

Some wires stories say that a state senator will sponsor a securitization
bill.  Others say that it will be the Governor's bill.  Is securitization
legislation something that the Governor intends to sponsor/support?

Though there are clearly some challenges to securitization, we think it
offers a promising option.

Hope the information is useful.

Best,
Jeff
(See attached file: Nord Pool.doc)

----- Forwarded by Jeff Dasovich/NA/Enron on 01/04/2001 07:16 PM -----


"PennFuture"

<pennfuture@pennf        To:     <Undisclosed-Recipient:

uture.org>               @mailman.enron.com;>

cc:

01/04/2001 11:12         Subject:     PennFuture's
E-cubed -- Price,
AM                       Policy and Misperception

Please respond to

"PennFuture"










PennFuture's E-cubed is a commentary biweekly email publication  concerning
the current themes and trends in the energy market.


January 4, 2001Vol. 3, No. 1

Price, Policy and Misperception

The ringing in of 2001 marks the completion of the fourth year since
Pennsylvania's electricity competition law went into effect on January 1,
1997,  and the second year since Pennsylvania's retail market was fully
opened to  customer choice on January 1, 1999. But nationwide, while
reliability,  environmental performance, and assistance for low-income
customers are crucial  factors, the price of power has alone become the
main standard for judging the  success or failure of competitive transition
policies. Near hysteria about  prices is yet another fallout of the
California mess where rates are a daily  nightmare for consumers.

In an effort to broaden electricity policy discussion beyond the myopic
focus on California, we note that competitive residential retail prices of
electricity in Pennsylvania this New Year are considerably below what
customers  were paying for generation and transmission service or embedded
generation on  January 1, 1997. If you doubt it, compare columns B and D
below. Just as  interestingly, competitive prices for 100% renewable energy
products are well  less than what customers of Duquesne Light and PECO
Energy paid for power  generated from mainly coal and nuclear prior to
competition (columns C and  D).

Comparison of Residential Unbundled Embedded Generation to Retail Power
Prices (in cents/kWh)A. 2000 Shopping CreditB. Lowest Retail PriceC.  100%
Green Power Prices?D. Embedded Generation &  Transmission
A.??????? B.?????  C.???????  D.Duquesne?????? 4.80???  4.60??? 6.49
8.75GPU/Met-Ed??  4.53??? 4.60??? 7.09???  5.70GPU/Penelec? 4.53??? 4.50
7.09???  5.40PECO????????????  5.65??? 4.65??? 6.37???  8.65PPL
4.61??? 4.30??? 7.09???  6.26Allegheny???????  3.24??? 5.20??? 6.49
5.30Note: 2001 shopping credits will be moderately higher in some  cases.

In most parts of the Commonwealth, current competitive retail prices for
residential customers are 0.90 to 3.15 cents per kilowatt-hour less than
what  customers were paying for the same generation and transmission
service prior to  competition. As a result of stranded cost charges that
utilities are being  allowed to collect, these substantial competitive
savings are not fully passed  on to consumers.

In fact, were it not for stranded cost charges, Pennsylvania's residential
customers would have had their total rates (including distribution and
transition rates) decline by about 20% in 2000. Generation rates would have
declined by as much as 40%. These huge price reductions are real but will
not  fully reach customers during the transition period when utilities are
allowed to  collect stranded costs.

Competitive retail prices are also in most cases less than Pennsylvania's
default rates or shopping credits. This is important and encouraging,
because  Pennsylvania's current residential default rates or shopping
credits are in  every case much less than what customers were paying for
generation service at  the start of the competitive transition. Indeed,
current default rates are about  one to three cents per kilowatt-hour less
than residential customers were paying  for the same service from their
local utility prior to competition.

The California fiasco has meant a lot of discussion about the price of
electricity, but it has not meant a lot of understanding of sensible
competitive  policies' potential impact on retail prices. Instead, a great
deal of reporting  reflects understandable misconception of basic price
benchmarks. For example,  very few stories identify accurately or even at
all what customers were paying  for generation service prior to competition
(the pre-competition embedded  generation rate of the incumbent utility).
This failing can be traced to the  fact that states have not prominently
made this data available.

Worse yet, many press articles mistakenly assume the default rate or the
shopping credit is equal to what customers were paying the local utility
for  generation service prior to competition, and report that competition
will lead  to price shock for customers if market prices exceed present
default rates. But  this dramatic warning is typically wrong.

The press' misunderstanding hides an important fact: current default  rates
or shopping credits are nearly always much less than what customers were
paying for generation service prior to competition. Total rates after the
transition to competition will not be greater than they were prior to
competition, unless competitive retail rates exceed the utility's
pre-competition embedded generation rate.

Consequently, if competitive prices are higher than current default rates
but lower than a utility's pre-competition embedded generation rate,
consumers  will have lower total rates once stranded cost charges are
removed and the  transition period expires. That is, they will if a state
creates a genuinely  competitive retail market that pulls through
competitive prices.

E-cubed is available for reprint in newspapers and other publications.
Authors are available for print or broadcast. Support E-cubed by becoming a
member of PennFuture ? visit our secure online membership page at
www.pennfuture.org by clicking on "Support  Our Work."?PennFuture, with
offices in Harrisburg, Philadelphia and  Pittsburgh, is a statewide public
interest membership organization, which  advances policies to protect and
improve the state's environment and economy.  PennFuture's activities
include litigating cases before regulatory bodies and in  local, state and
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(See attached file: Vol3No1_10301.doc)