In the Room

PG&E presented its "Share the Pain" proposal:
 --  Each party allocated a share of the utilities' unmet load (4,000 MW of 
PG&E and 8,000 MW for SCE)
 --  Allocation based on the volume of sales made to ISO and PX in 3rd and 
4rth Q of 2000 (% of total)
  and "profits" received.  "Profit" allocation would be returned as discounts 
to the utilities for 2001
  and 2002. Judge would determine whether allocation of "profit" was fair for 
each party.
 --  Those who participate retain market-based rates for all other sales.
 --  Those who don't .......?  Not clear what can happen.  PG&E suggested 
lose market power license,
  which was very negatively received by all marketers.
 --  PG&E says go along because otherwise we won't pay you the $2 billion we 
owe right now.
Enron responded publicly that it wants to work in this process and be 
positive, but utilities would need to
 provide MAJOR quid pro quo for this, such as release from legal liability 
and auctioning off retail load --  and how does this work with so many 
parties missing from the room (i.e., Governor, CPUC, Legislature,  BPA, 
PowerEX, etc.)
Marketers met separately with the Judge. Avista, Morgan Stanley, PG&E 
National Energy Group, Strategic Energy, BP, Merrill Lynch. Explained that 
PG&E's offer did not work for marketers -- no owned assets, can't have 
obligation to buy in the market and sell to the utilities at a loss. We point 
out that we did not come in good faith to "write a check" -- that was not the 
stated intent of the discussions

Out of the Room

More talks between PG&E and SDG&E and some of the generators; SCE still on 
the sidelines.
Late in the day, Judge meets with IOUs and gens for two hours.
Reporters hover at door and try to get info from those coming and going.

Next Steps -- The Judge Speaks Again

Judge annuounces the generators are working on spreadsheets to come up with 
the dollars for a workable proposal. Asks people to return Friday, 10:00 am.  
Does not address how this proposal would effect marketers -- tells us to talk 
to the generators.
Announces that he intends to "send a signal to the financial markets 
tomorrow." He seems to want to take these unusual steps in spite of these 
confidential settlement discussions -- to help the utilities and as he said, 
"buy us some time."
Judge asks ISO and PX to provide the name of each Scheduling Coordinator 
selling to the ISO and PX markets and the amount sold by each.  Goal-- to 
find  out who has what market share (and, I suspect, later, the biggest 
chunck of "profits') Don't know how long this will take.  I suggest two weeks.
Judge says when he gets this info, he will know what other parties to 
"encourage" to be in the room.

Discussions with Reliant

John Stout from Reliant seems to be taking the lead for the gens.
John understands that Power EX and BPA will not sell to California below 
market.  He understands that marketers have the same problem.
He claims to be working toward the buckets I mentioned yesterday -- so some 
people sell at market and some have lower-priced (and I presume 
longer-termed) forward contracts. He promises to have something to share 
(with all the parties) tomorrow at 10 am.
John wants for us all to reach some agreement on Friday and be able to say to 
Governor Davis that we have solved the wholesale price problem long-term -- 
but to make this work, you need to raise retail rates by an additional  X% 
(he thinks another half a cent might do it). Then Governor Davis can 
incorporate this into his State of the State address on January 8.
Stay tuned.