CA May Seek to Reneg. Power Deals; Headline/Political Risks Re-emerge

*	Expect Calif. Gov. Gray Davis will announce today plans to
renegotiate power contacts that the California Department of Water Resources
(CDWR) signed with suppliers earlier this year. 
*	Potential exposure for: EPG, DYN, WMB, MIR, NRG, CPN, AYE, CEG and
SRE, but estimate in the low single digit range, if any (See Table). DUK and
REI not exposed,    as contract expired or none signed.
*	Main risk: resumption of Calif. headline risk, which had subsided
earlier this year with the decline in power prices. 
*	It appears that none of the power companies have yet been contacted
by the state, and it is unknown what approach that the state may take.  
*	Some companies have expressed a willingness, but no obligation, to
discuss the contracts, but would push hard to retain the NPV of the deals.
 <<CA Pwr.pdf>>  <<CDRW reneg.doc>> 
Raymond C. Niles 
Power/Natural Gas Research 
Salomon Smith Barney 
(212) 816-2807 
ray.niles@ssmb.com 

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