Angela -

The value proposition for a customer is related to which buckets of cost would be bypassed by switching to DA.  If a customer goes DA after August 24, 2001 (based on the discussion about surcharges in the legislation that has only passed the Assembly Energy Committee last night - with still a very low probability of success of being signed by the Governor), the customer would pay for SCE undercollection (PG&E isn't being discussed on this piece), DWR bond costs, and DWR net unavoidable.   The hardest piece to calculate - which Belden said on the last call he simply couldn't given the tremendous uncertainty - is the DWR net unavoidable.  If the customer has been DA since July 1, the customer could avoid the DWR net unavoidable (but the legislation could change or not pass and the CPUC could do something else).

Each customer needs to appreciate this latest information and make a determination about what these amounts will be - the key question I'd ask a customer is that they need to try and keep their options open.

Of course, all of this assumes that the CPUC doesn't go back and suspend DA even earlier than July 1 or something else crazy happens - remember this is California.

Jim
 -----Original Message-----
From: 	Schwarz, Angela  
Sent:	Wednesday, August 29, 2001 6:59 PM
To:	Steffes, James D.
Subject:	RE: Direct Access

EOP has been under contract since July 1, does that make a difference?


From:	James D Steffes/ENRON@enronXgate on 08/29/2001 05:00 PM
To:	Angela Schwarz/HOU/EES@EES
cc:	 
Subject:	RE: Direct Access

Thanks for the info.  While there may be some differences in presentation, there don't appear to be any basic differences in the analysis.  All of the discussions of the legislation need to be aware that the passage is highly uncertain.

I agree with the analysis that if you have never been DA and sign up today there is a very large possibility that you will pay a surcharge (assuming the legislation passes).  

Let me know if there is anything else.

Jim


-----Original Message-----
From:	Schwarz, Angela
Sent:	Wed 8/29/2001 2:02 PM
To:	Steffes, James D.
Cc:	
Subject:	Direct Access


---------------------- Forwarded by Angela Schwarz/HOU/EES on 08/29/2001 02:02 PM ---------------------------


Gary Odland
08/29/2001 01:38 PM
To:	Angela Schwarz/HOU/EES@EES
cc:	Jeff Gale/HOU/EES@EES 
Subject:	Direct Access

Attached is a CA DA brief that Frank received from Les Spahn.  Les has opinions that are different from what we have been advising Frank and EOP.  I need your opinion on how to address these differences.  Thanks.
---------------------- Forwarded by Gary Odland/HOU/EES on 08/29/2001 01:36 PM ---------------------------


Frank_Frankini@equityoffice.com on 08/29/2001 11:55:15 AM
To:	godland@enron.com
cc:	 
Subject:	Direct Access


Gary, I need Enron's comments on this ASAP.
----- Forwarded by Frank Frankini/Engineering/Corporate/Equity_Office on
08/29/2001 11:54 AM -----

                    "Les Spahnn"
                    <spahnn@hnks.c       To:
                    om>                  cc:
                                         Subject:     Direct Access
                    08/27/2001
                    04:51 PM






All:
A lot of runors are swirling around.  There is legislation pending right
now as I write this e-mail.  The outcome is uncertain.  But here is what I
know and what I have been working on for BOMA.
First, the CPUC continues to threaten that it will suspend DA on September
6th, including any DA contract signed since last January.  The PUC has
threatened this several times and has deferred action several times pending
action on the issue by the legislature.  Even if the PUC were to act, the
legislature could override their action with a statute.  But I anticipate
that they will not act as long as the legislature is actively considering
the matter and does something before recessing for the year on September
14th.
The real action is in the legislature.  There is a comprehensive bill -- SB
78XX, the centerpiece of which is a bailout of Southern California Edison.
For DA or anyhting else in the energy arena to happen, the Governor and the
Assembly Democratic leadership insist on having a bailout of Edison.  Here
are the details of the bailout and DA which is linked to it:

1) The state would securitize $2.9 billion in bonds to help SCE pay its
debts.  Those bonds would be repaid by Edison customers who use 20kW or
more in peak daily demand.  That would translate to about 0.06 (as in
6/100ths) of a penny per kW.  The original proposal was to place the
bailout burden only on SCE customers who use 500kW peak demand, which would
have been maybe 1.5 cents per kW (since the base would have been much
smaller), but  we beat that back to the current proposal of 20kW.

2) The Edison surcharge would be non-bypassable.  That means that Edison
customers are going to pay it whether you get your juice through Edison or
from a DA contractor.  If anyone is telling you that you can avoid the
Edison bailout surchage by going DA they are lying!

3) The bill would permit DA going forward if there is demand (load) which
exceeds supply as calculated as follows: DWR contracts + IOU retained
generation + IOU long term contracts.  If this delta, or headroom exists as
of 1/1/03, then, per PUC regs,which are yet to be devloped, the Calif.
Energy Commission would periodically permit DA contracts up to the amount
of headroom, without the customer having to pay the state an exit fee.  (An
exit fee is a fee which would otherwise have to be paid to the state by a
customer for the customer's proportional share of the state's stranded
costs which accrue from power contracts bought by DWR, but for which there
is no market.)  If no headroom exists, a customer still could go DA, but
pay the exit fee to do so.

4) A major issue is what DA would be permitted and what would be suspended.
Right now the proposal is to permit all DA contracts that existed prior to
1/17/01 to continue without penalty.  It looks like contracts signed
between January and June would also be permitted to remain without penalty,
but that date is not definite.  Contracts signed between June and August
24th would also be permitted, but may have to pay some sort of retroactive
exit fee, on a sliding scale, depending on the date they were signed.  All
DA contracts after August 24th would be subject to the 1/1/03 schedule
described in #3 above.

In addition to an Edison surcharge for Edison customers, and exit fees for
DA customers when no headroom exists, there will be another surcharge for
all non-municipal customers who have bought power through an IUO since
January 17th.  That surcharge would be to payoff $13 billiion in state
revenue bonds which would be to repay the state General Fund for power DWR
bought since January.

Where does BOMA, and the rest of the business community stand on these
issues?

1) BOMA has been O.K. with the bond surcharge because every IOU electric
customer has been paying subsidized rates for electricity since Jan. 17,
when the IOUs became uncreditworthy and DWR started buying spot market
power.

2) While BOMA and others are not happy with the price and amount of DWR
long term contracts, we understand the state is CURRENTLY on the hook for
them, and wants to be held harmless for their costs.  BOMA and other
business groups are pushing to have as many of those contracts renegotiated
or abandoned where possible to make more headroom available for DA without
exit fees.

3) BOMA supports another provision of the bill which would rebate any
surplus electricity revenues after the first $500 million to ratepayers
based on each customers proportional share of consumption and electric rate
payments.  This provision is designed to soften the rate increases on
customers who have experienced rate increases greater than 50% in the last
few months.

4) Finally, BOMA is not happy with a ratepayer bailout of Edison.  But the
Governor seems to want it more than breath and he is strong arming everyone
he can see, including all business groups, to help get it enacted.  In that
light, BOMA supported a position that all ratepayers, residential as well
as business pay the debt.  The legislature, however, did not want to pass
this cost on to residential customers, so then it became a fight over where
the consumer threshold would be.  As stated above, we have suceeded in
getting it as low as 20kW peak demand.  (NOTE:  There are those that feel
it is worth bailing Edison out and getting them creditworthy in order to
get the state out of the energy business.  You can decide for yourselves.)

5) It should also be noted that the Edison, bond and DWR surcharges may all
be covered in the existing rates you are now paying.  That is to say that
there may be no need to raise rates again to meet these obligations since
the market price for power has come down substantially.  But this remains
to be seen.

There is more to this package and moer to come i9n terms of changes.  The
committee is going back in at 6:30 this evening and we will see what
happens.  I hope tis helps you in understanding the situation.

Les Spahnn



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