---------------------- Forwarded by Jeff Dasovich/SFO/EES on 09/01/2000 05:51 
PM ---------------------------


Jeff Dasovich
09/01/2000 05:31 PM
To: jdasovic@enron.com
cc:  
Subject: Possible Messages on Legislation in California

Here's an attempt at being frank about the legislation without jeopardizing 
our relationships or commercial prospects.

Overall, we respect the effort, but California failed to get the ball over 
the goal line:

On Siting
Intentionally or not, California has designed power plant siting laws that 
make it excruciatingly difficult to construct power plants in the state.  
Folks seem to have lost sight of the need to balance growth and environmental 
quality in California.
That's why nothing's been built in the state for a decade and developers are 
going outside the state to build power plants. 
Tinkering around the edges won't help; and (with all due respect) the 
legislation passed yesterday tinkers.
Real reform is required if California hopes to build the supply necessary to 
keep pace with Silicon Valley and a high tech culture and tame the price 
spikes.
If developers continue to have to navigate through a maze of a half a 
dozen--or more--state and local agencies, California's supply problems will 
continue, or worsen.
California needs real, one-stop shopping and it needs it now.

On the retail price cap
They don't work (we've already developed all the arguments, so I won't repeat 
them hear)
The press has already reported that the measure the Legislature passed simply 
puts off the day of reckoning.
It's like using your credit card--eventually they're going to knock on your 
door to collect.
Now, families and businesses will have a hard time managing their budgets 
because they can't gauge the size of the balloon payment they'll face a 
couple of years down the road.
So San Diegans who continue to take service from SDG&E will pay the same 
amount, but the cap will remove the powerful incentive prices create to use 
electricity wisely--bad solution.
There's a better answer:
Instead of urging consumers not to switch, encourage customers to sign with 
another retail provider.  
Clearly, the biggest mistake California made was neglecting to establish a 
retail market in its restructuring legislation.
Urging customers to stay with the utility made matters worse, given the 
volatility of the Power Exchange. (Variable rate mortgage story.)
But some customers who did switch and who took a fixed-price deal with 
companies like ours are doing very well.  
But for the press reports, the customers who switched to those deals hardly 
know there's a crisis.
So California needs to follow's Pennsylvania's lead and make a market that 
works for retail customers.
If the price spikes in the PX worry you, the best way to protect yourself is 
to leave the utility and switch to another provider who's willing to take on 
that risk on your behalf.
Remove the monopoly that California originally granted to the PX.
Just like the customers who switched, the utilities could have bought 
fixed-price power and protected themselves from the PX's price volatility.
But for some crazy reason, California forced the utilities to buy everything 
from PX.
And the utilities have complained about it---even former monopolies don't 
like buying from a monopoly.
Let the utility buy from any competitive source available.
Don't meld the PX with the ISO---that would simply re-enforce the PX monopoly 
and make a bad situation much worse.
Make California's ISO a for-profit "Transco," like we have in our interstate 
gas pipeline system
[[I leave this last recommendation as food for thought.  May be too much to 
bite off.]]

Have a good holiday.

Best,
Jeff