See bolded comment below:

 -----Original Message-----
From:  EFeo@milbank.com@ENRON 
[mailto:IMCEANOTES-EFeo+40milbank+2Ecom+40ENRON@ENRON.com] 
Sent: Wednesday, May 02, 2001 11:35 PM
To: awirum@pillsburywinthrop.com; fallon_annamarie@jpmorgan.com; 
alafaire@exchange.ml.com; PAronzon@milbank.com; byong@llgm.com; 
bgreene2@mail.state.tn.us; bholman@whitecase.com; bkrakauer@sidley.com; 
fishbcr@whitecase.com; ceklund@llgm.com; clara.strand@bankofamerica.com; 
DDR0@pge.com; dan_faltermeier@dynegy.com; david.adante@davey.com; 
MDayen@milbank.com; dnelson@gwfpower.com; 
elizabeth.h.baird@bankofamerica.com; eric.carlson@eycapadvisors.com; 
EFeo@milbank.com; lengel@brobeck.com; gmkaplan@hrice.com; gbush@bankofny.com; 
SGautier@milbank.com; gerald.keenan@us.pwcglobal.com; 
grant_kolling@city.palo-alto.ca.us; gbaer@pillsburywinthrop.com; 
GMR2@pge.com; jostevenson@bankofny.com; james.drzemiecki@us.pwcglobal.com; 
jlhuemoe@llgm.com; jlopes@hrice.com; jnexon@hrice.com; jwhite@brobeck.com; 
jwilson@saybrook.net; jbloom@whitecase.com; jpiassick@kilpatrickstockton.com; 
john.c.herbert@dynegy.com; jklauber@llgm.com; jschotz@saybrook.net; 
jeisenberg@exchange.ml.com; jrosenthal@saybrook.net; jthomas@saybrook.net; 
juhase_kathleen@jpmorgan.com; kcoleman@gibsondunn.com; 
keith.marshall@usbank.com; ken.buckfire@drkw.com; ksmith@deltapower.com; 
krussak@pillsburywinthrop.com; KMH5@pge.com; TKreller@milbank.com; 
Mellencamp, Lisa; freddie.reiss@us.pwcglobal.com; 
margery.neis@us.pwcglobal.com; AMarks@milbank.com; 
martin.nachimson@eycapadvisors.com; KMcspadden@milbank.com; Tribolet, 
Michael; michael.bruder@drkw.com; mahrens@smrh.com; 
michael.hamilton@us.pwcglobal.com; Mjhamilt@bellatlantic.net; 
mhindus@pillsburywinthrop.com; mlurie@exchange.ml.com; RMoore@milbank.com; 
PNaegely@milbank.com; nmillard@whitecase.com; FNeufeld@milbank.com; 
toth_norma@jpmorgan.com; pwarden@pillsburywinthrop.com; 
rlapping@thelenreid.com; rkampfner@brobeck.com; robert_b._lynch@chase.com; 
rblum@thelenreid.com; rocky.ho@us.pwcglobal.com; RJP2@pge.com; 
srahman@deltapower.com; MSorochinsky@milbank.com; tponsford@smrh.com; 
tom.lumsden@us.pwcglobal.com; tpatters@sidley.com; tmilne@mail.state.tn.us; 
wevanoff@sidley.com; DZolkin@milbank.com
Subject: Regulatory Update


New developments: 
1.  The Federal Energy Regulatory Commission (FERC) has issued a public 
notice (see attached) regarding certain pleadings that were filed for 
purposes of requesting emergency relief for qualifying facilities (QFs).  The 
FERC's Notice states that Ridgewood Power LLC (Ridgewood) submitted a Request 
for Emergency Relief and an Updated Request for Emergency Relief, on March 8, 
2001 and April 9, 2001, respectively, requesting the FERC to take action to 
prevent QF capacity from going off-line in the State of California.  
Ridgewood asks the FERC to take actions that will permit those QFs in 
California that have not been paid fully for past power deliveries to enter 
arrangements to temporarily sell to third-party buyers within California.  
Ridgewood asks the FERC to declare that California electric utilities cannot 
deny transmission access to QFs or otherwise frustrate the ability of QFs to 
sell to third-party purchasers.    
Similarly, the California Cogeneration Council (Cogeneration Council) on 
April 9, 2001, filed a Motion for Emergency Relief requesting the FERC to 
take action to prevent QFs from going off-line in the State of California.  
The Notice states that, among other things, the Cogeneration Council requests 
the FERC to require interconnection, transmission, and related services under 
section 210(d) of the Federal Power Act on a temporary basis pending the 
resolution of  accounts receivable issues. The FERC will address the 
Cogeneration Council's motion and the responses thereto in the proceeding 
established for the Ridgewood filings.
The FERC is also instituting a proceeding under Section 210(d) of the Federal 
Power Act on its own motion.  In this proceeding, the FERC will consider 
whether and to what extent it may need to order the provision of 
interconnection, transmission, and related services under Section 210(d) to 
alleviate generation capacity supply shortages in California.
Pleadings in response to the FERC's Notice are due by May 10, 2001. 
2.  Edison Mission Energy (EME) has submitted a filing at the FERC seeking 
authorization for an internal reorganization.  The filing states that the 
purpose of the proposed transaction is to permit Edison International (EIX) 
to obtain financing needed to meet its near-term obligations as well as 
potential obligations under the Memorandum of Understanding (MOU) negotiated 
with the State of California.  The proposed transaction involves the creation 
of a new intermediate holding company (NewCo) between EIX' direct subsidiary, 
The Mission Group, and The Mission Group's subsidiary, EME (the new holding 
company will acquire all of the common stock of EME).  NewCo will secure new 
financing, using its EME holdings as collateral, and dividend proceeds of the 
financing up to The Mission Group, who will transfer the funds to EIX through 
a loan.  NewCo will establish a separate corporate structure so that it is 
structurally remote from a potential bankruptcy of EIX.  EME has requested 
that the FERC authorize the restructuring by May 14, 2001.  EME states that 
EIX' current credit facility matures on May 14 and that additional 
obligations come due in July and November 2001.  In addition, it states that 
EIX' cash requirements in 2001, including its MOU obligations, are expected 
to exceed its cash distributions from subsidiaries.  The FERC issued a public 
notice of the filing, which provides that any pleadings in response the 
filing be submitted by May 10, 2001.
3.  The Independent Energy Producers Association held a press conference to 
present their report "Powerful Ideas" - which offers solutions for rebuilding 
California's troubled electricity market.
4.  This morning, Governor Gray Davis' staff hosted a conference call to 
update the financial community on the Governor's plan to address the ongoing 
California energy crisis.  Overall, Joseph Fichera with Saber Partners and 
financial advisor to Governor Davis, said that the Governor's goal is to 
protect ratepayers and the California economy.  He added that the Governor 
wants to focus on rates, as well as increasing energy supply.  The Governor's 
goal is to have a stabilized power market and 20,000 MW online by 2003.  
Fichera said that the Governor's plan is the best option available for 
dealing with the crisis and that the only other alternative is bankruptcy 
reorganization.
The Governor's plan, which Fichera described as "detailed and complex", uses 
the Memorandum of Understanding ("MOU") entered into with Southern California 
Edison ("SCE") as the template for future agreements with other utilities.  
The MOU requires legislative, regulatory and administrative actions to be 
completed in order to be successful.  On the legislative side, the Governor 
will send proposed legislation to the California legislature later today or 
tomorrow.  At this point, no decision has been made regarding sponsorship of 
the legislation or whether or not the bill will be introduced into the 
Assembly or the Senate.  On the regulatory side, Fichera said that the 
California Public Utilities Commission ("CPUC") already has begun to 
implement portions of the MOU using their normal rulemaking processes.  
Fichera hopes that the CPUC will be able to complete its necessary actions in 
June or July.  Finally, on the administrative side, the Governor's staff is 
moving forward with SCE in negotiating and documenting the definitive 
agreements that are necessary to implement portions of the MOU.  These 
agreements are required to be completed by 15 August 2001.
With respect to the other utilities, the Governor is in the final stages of 
negotiations with San Diego Gas & Electric and expects an agreement to be 
reached within the next two weeks.  Fichera also said that PG&E "remains on 
the radar screen," and that the Governor believes that the successful 
implementation of the SCE plan as detailed in the MOU will result in PG&E 
coming out of bankruptcy faster.  The Governor's representatives have met 
with the Unsecured Creditors Committee and their representatives to review 
the financial information in the MOU and the implementation plans.  Fichera 
said that he hopes that PG&E "will seize the opportunity" to take advantage 
of the proposal on the table.  He also urged the "Wall Street community to 
speak with PG&E to convince the company's management to return to the 
negotiating table in order to emerge from bankruptcy sooner rather than 
later."
5.  Lt. Gov. Cruz Bustamante filed suit against  five power generators in Los 
Angeles Superior Court alleging the generators conspired to drive up 
electricity prices and that the five companies gained control of the state's 
power market and used unlawful trading practices to manipulate prices.  The 
generators named in the suit are Duke Energy, Dynegy Inc., Mirant Inc., 
Reliant Energy Inc. and Williams Cos.  
6.  SDG&E filed suit against three power generators in San Diego Superior 
Court, alleging that the generators illegal shut their plants down during the 
state's power crisis.  SDG&E is asking the judge to order the generators  to 
deliver electricity during peak periods this summer.   The companies are 
Sithe Energies, Applied Energy and Energy Factors.  
7.  A judge in Riverside County denied the request of Corona Energy Partners 
LTD, a QF, to be released from its PPA with SCE. 
8.  U.S. Rep. Doug Ose, R-Calif., is introducing a bill to increase 
hydroelectric power in the West. The bill would allow the U.S. secretary of 
the interior or the secretary of the army to waive restrictions on federal 
dams to address an emergency electric power shortage declared by a governor. 
Ose says the bill would give hydroelectric dams more flexibility and would 
help provide power when demand rises this summer.  
 <<QF Emergency Relief - FERC Notice.txt>> 
Regards, 
Paul Aronzon (paronzon@milbank.com) 
Robert Moore (rmoore@milbank.com) 
Ed Feo (efeo@milbank.com) 
Allan Marks (amarks@milbank.com) 
Fred Neufeld (fneufeld@milbank.com) 
Kevin McSpadden (kmcspadden@milbank.com) 
 <<...>> 
  www.milbank.com  
This e-mail message may contain legally privileged and/or confidential 
information. If you are not the intended recipient(s), or the employee 
or agent responsible for delivery of this message to the intended 
recipient(s), you are hereby notified that any dissemination, 
distribution or copying of this e-mail message is strictly prohibited. 
If you have received this message in error, please immediately notify 
the sender and delete this e-mail message from your computer. 

 - QF Emergency Relief - FERC Notice.txt