Bruno, make sure Sandi gets this when she is in London.  Thanks.

1.  Forward Contracting and Bilateral Contracting
a.  Expectations are that the supply/demand balance for Summer 2001
will again be tight.
b.  All 3 IOUs have an interest in managing their risk exposure
i.  increasing undercollections
ii. reducing headroom for CTC collection
c.  Uncertainty around CPUC reasonableness review has stifled IOU
contracting activity
d.  Reasonableness must be upfront and not backward looking
i.  competitive bid (public agencies do this, utility sale of
generating assets) provides a tangible measure of IOUs selection
ii. recommend a portfolio approach (various block sizes, various
terms, various pricing
iii. most PBRs compare short-term market indices to utility
portfolio costs.  It is another way of determining reasonableness.

2.  Determination of IOU obligation for procurement is key to providing
direction on forward contracting

Reasonableness is a CPUC issue.  Default Provider would require
legislation
a.  Question about whether IOUs should continue to be procurers of
energy for customers.
b.  In the interim, after the freeze, IOUs may need to continue as
default provider to residential and small commercial customers to
provide rate stability.
b.  IOUs should not continue a default provider role for large
commercial/industrial accounts, but only a provider of last resort
c.  Large commercial/industrial customers have no continuing cost
obligation for procurement service from utility.
d.  Commission should investigate alternatives to utility default
provider within 2 years.  PECO just held an auction 3 companies bid.
TNPC won.
e.  Utility contracts should consider potential of customers to DA and
potential for alternative default provider.
f.  Utilities default could be a portfolio (i.e. Oregon).  Residential
and small commercial customers could choose from a limited number of
services such as spot, 1-year fixed.

3.  Utility Undercollections/Rate Freeze
a.  Commission is examining accounting changes to mitigate SCE/PG&E
undercollection problem.
b.  TURN has proposed collapsing undercollection with stranded costs
and continuing the current statutory period for collection.  We support.
c.  May need legislation if carry any undercollections into
post-freeze.
d.  Continuation of rate freeze would require legislation.  May be
cleaner to run rate freeze through current deadline and look at a rate
stabilization proposal to replace frozen rates for 2002.
e.  Ending the rate freeze early will prematurely expose customers to
fluctuation.
f.  Undercollection issue is a snapshot in time.  Allow rate freeze to
continue gives opportunity to mitigate current position.
g.  Utilities are generating revenues in excess of costs.  Generating
assets value has increased.