Harry, Marty Sunde, Jeff Dasovich and I were on a trip with Ken Lay last 
week.  I understood from Marty that Ken may believe that all customers, 
including direct access, should pay the increase you mention.  Marty?  This 
was encouraging from a litigation exposure standpoint because, to the extent 
all consumers are treated alike, our DA customers who were resourced to 
utility service cannot claim to have been disadvantaged by our action.  The 
converse is also true:  if they have to pay because they were put back on 
utility service they may try to pass that cost through to us.  To the extent 
that any increase is to pay back DWR for buying power 2/1/01-3/31/02, and 
those on DA are not required to pay this, EES could have a substantial 
exposure to its customers.   Maybe we need to modify our strategy to take 
this into account.
 -----Original Message-----
From:  Kingerski, Harry  
Sent: Thursday, May 24, 2001 8:48 AM
To: Sunde, Marty; Benevides, Dennis; Dotson, Marcus; Williams, Robert C.; 
Frazier, Lamar; Stoness, Scott; Johnson, Tamara
Cc: Lawner, Leslie; Steffes, James; Neustaedter, Robert; Mara, Susan; 
Dasovich, Jeff
Subject: San Diego Update


SDGE's Advice Letter filing confirms that the ABX143 rate freeze of 6.5 cents 
does not apply to direct access.

In hearings on SDGE's potential rate increase for large customers:
SDGE has proposed to allocate all retained generation to small customers 
(below 100 kw).  Large customers would be served  by DWR (or be direct 
access).  It's apparent several parties have major problems with this.
It is interesting that SDGE has calculated the expected rate increase under 
their plan as 2.86 cents.  If large customers are allocated a piece of 
retained generation, the increase goes up to 2.99 cents.  In the latter case, 
large customers retain a CTC (related to QF contracts and other long term 
stranded costs) that they would lose in the former case.
Our involvement is to get an order 1) excluding DA from any rate increase 
(the proposed 2.86 cents) 2) excluding DA from any surcharge related to 
undercollection from the rate freeze (an amount that is not known at this 
point) 3) prorating the surcharge related to undercollection if the customer 
switches from DA to bundled service during the rate freeze period 4) ensuring 
there is a return to market pricing once the rate freeze is over.

PUC decisions on these issues are expected June 28.  There is no discussion 
of restricting movement between bundled service and DA.  On our issues noted 
above,  #1, 2, 4 have high probability of success; # 3 is 50/50.