Jim Steffes suggested that I forward this to you for discussion at the 
California Conference call tomorrow.

Steve Walton
----- Forwarded by Steve Walton/HOU/ECT on 02/08/2001 05:08 PM -----

	Steve Walton
	02/08/2001 04:50 PM
		 
		 To: James D Steffes/NA/Enron@Enron
		 cc: 
		 Subject: Ownership of California Transmission System

Jim,

I got a call this afternoon from Paul McCoy, a principal in TransElect.  We 
spoke to them about being a transmission operator during the E-Trans 
consortium discussion last fall.  Paul told me that they have been actively 
pursuing an offer for the transmission systems of PG&E and SCE as an 
alternative to the State of California taking title to the transmission 
system as part of the legislative solution.  Some of our fellow marketers are 
sufficiently concerned about California ownership that they have offered to 
provide funding to the effort, not as investors which would taint the 
acquisition, but more of grant to assist the effort.  Paul did not tell me 
who the parties are, but it is probably the "usual suspects" who own 
generation in California (my guess).  

Paul called to see how we would view this effort.  They are interested in the 
possibility of our supporting a private acquisition of the transmission 
assets, not necessarily financial, but the use of our contacts and personnel 
to provide public and private support to such an effort.  

As I think about the State owning the transmission system and being the 
purchaser of energy, it seems like they are assembling a large vertically 
integrated public power utility under the control of the Governor -- de facto 
re-regulation only worse.  Once the state own the transmission system, I 
doubt it would every be privatized.  

What are your views?  Would Enron be interested in supporting this effort?

Steve