FYI
---------------------- Forwarded by Chris Holmes/HOU/EES on 05/14/2001 06:47 
AM ---------------------------


Marty Sunde
05/13/2001 08:31 PM
To: Kevin Keeney/HOU/EES@EES, Marcus Dotson/HOU/EES@EES, Lamar Frazier, Evan 
Hughes, Chris Holmes/HOU/EES@EES
cc:  
Subject: FW: Direct Access Legislation and the impact on Settlement 
Discussion s with UC/CSU

fyi
---------------------- Forwarded by Marty Sunde/HOU/EES on 05/13/2001 08:31 
PM ---------------------------
From: Robert C Williams/ENRON@enronXgate on 05/11/2001 05:39 PM
To: Vicki Sharp/HOU/EES@EES, Marty Sunde/HOU/EES@EES, Dan Leff/HOU/EES@EES
cc:  
Subject: FW: Direct Access Legislation and the impact on Settlement 
Discussion s with UC/CSU

fyi

 -----Original Message-----
From:  MDay <MDay@GMSSR.com>@ENRON 
[mailto:IMCEANOTES-MDay+20+3CMDay+40GMSSR+2Ecom+3E+40ENRON@ENRON.com] 
Sent: Friday, May 11, 2001 5:27 PM
To: 'Kristen Bird'; 'awu@quinnemanuel.com'; 'Richard.Sanders, Enron'; 
Williams, Robert C.
Cc: JBennett
Subject: Direct Access Legislation and the impact on Settlement Discussion s 
with UC/CSU

Richard Sanders and Bob Williams asked that I provide the following brief
memo in order to summarize wherer the legislative efforts are at this time
and how they might impact settlement discussions.

With the close of the first extraordinary session today, a second
extraordinary session will open on Monday and all the existing but unpassed
bills will be reintroduced--so we are told.  That means there will continue
to be at least 2 bills which would substantially protect the rights of
customers to choose direct access, although both contemplate that under
varying circumstances the customer could be required to pay an exit fee.

What is relatively likely is this:

A direct access bill will pass this session.  It will likely create the
following situation:

Any customer who has not been on direct access continuously since before
January 17, 2001 will have used some power purchased by DWR while being
charged bundled utility rates far lower than the actual cost.  If these
customers (like UC) eventually elect to return to direct access they WILL be
required to pay the shortfall that has accrued while they were on bundled
service.

Other stranded costs which may be incurred by DWR after the customer leaves
bundled service for direct access may also be passed on in an exit fee.
This would include stranded contract costs if DWR has contracted for more
long term power than it has customers, as well as any costs related to the
bond financing intended to pay for the long term power contracts.  We HOPE
that the legislation will have a provision excusing the customers from such
an exit fee if DWR has not purchased all the net short power by long term
contracts and DWR can match its supply to the new lower demand simply by
reducing daily spot purchases.

UC would potentially face the first type of exit fee in any event, it may
face the second, although there is a possibility of a short "open
enrollement" period following passage of the bill, which would allow
customers to switch to DA immediately without paying the second type of exit
fee.

There may be other exceptions to the exit fees for customers who install
self generation or distributed generation.  This might affect a few UC
campuses, but not all.

At least one of the bills might give the CPUC enough discretion to permit it
to impose onerous conditions on direct access and thereby prohibit it.
However, this provision is strongly opposed by many customer groups and we
believe it can be defeated.

We do not know when the direct access legislation will be adopted.  We hope
within the next month.  We will keep you advised, and please feel free to
call for an update at any time.

Mike Day