I participated in a call with Nancy Vogel, energy reporter from the LA
Times, today and 2 other ARM members, Peter Bray, The New Power Company and
Rick Counihan, Green Mountain.  The conversation was mostly to provide
background on retail issues.  I emphasized that Peter and Rick were the
spokespeople for the coalition and I was there for background purposes
only.  She was very receptive and seemed to grasp the importance of
developing a retail market.

We discussed how AB 1890 was mostly geared toward developing a competitive
wholesale market and provided very little guidance about retail market
structure.  We discussed that during the rate freeze, there was no impetus
for consumers to shop, so long as they were insulated from market prices.
We also stated that the transition period was used more for ensuring
stranded cost recovery and not for developing a retail market structure.
We said that we have been raising the lack of retail market structure in
various proceedings at the CPUC.  Now that deregulation is center stage in
the administration, and likely the legislature, we feel it is important to
include retail competition as a solution to the problems in the market
today.

There was discussion about the utilities being required to purchase on a
spot basis through the PX and passing those costs directly to consumers.
With the spikes over the summer, consumers in San Diego revolted against
such substantial increases, without notice.  Because the retail market was
essentially undeveloped, consumers didn't know they had somewhere else to
go for relief.

Nancy asked why the retail market has not developed.

Rick responded that some of the authors of the legislation either believed
that competition at the wholesale level would provide adequate benefits to
consumers and therefore retail competition was not valuable or that the
rate freeze, insulation from price increases, was an adequate quid pro quo
to utility recovery of stranded costs.  Regulators have moved very slowly
on cost separation issues, allowing the utilities to continue to recover
the costs of their retail services through distribution rates from all
customers, make their prices appear to be cheaper.  Lastly, neither the
legislature nor the Commission determined what the utilities role in the
new restructured environment would be:  are they a pipes/wires company, are
they facilitators for direct access, are they competitors?

We explained that we believe there is a strong reason to define the
utilities obligation to serve residential and small commercial customers
now.  Large customers can take care of themselves.  Why is this important?
As the utilities enter into contracts, they need clarity on for whom they
have an obligation to purchase.  This minimizes any potential for future
stranded cost claims any claims that the utilities could make absent such
direction up front.  Secondly, it reduces the utilities ability to charge
an exit fee or other financial claim on departing customers who decide to
go direct access.

The next piece of the puzzle would be to define the default service for
residential and small commercial customers.  The utility would provide a
fixed-rate product to small residential and commercial customers for a
transitional period of time.  Based upon the San Diego experience, it is
politically imperative that smaller customers have rate certainty.  This
also provides a target against which other service providers can compete.
The utility's price is a fixed price with no true-up.  The utility would
have purchasing flexibility to meet the target price.  The price could be
set by the CPUC.  A certain portion of the utility's purchases will still
be met through spot market purchaes.  Customer migration, res and small
commercial, should not be an issue.

The last piece of the puzzle would be to encourage competition for the
default provider role, ala PECO, where 20% of the residential customers
went through an auction process.  (This issues is important to Shell and
The New Power Company.)

She seemed very interested in the issue, recognized that no one else was
talking about it and she may want to follow up with individuals later.
Getting customer affadavits would be another indicator of value for
developing a retail market that would be helpful for our PR efforts with
ARM and Edelman and for responding to press inquiries.

---------------------- Forwarded by Mona L Petrochko/NA/Enron on 11/27/2000
08:12 PM ---------------------------


"Fairchild, Tracy" <tracy.fairchild@edelman.com> on 11/27/2000 08:10:46 PM

To:   "Aaron Thomas (E-mail)" <athomas@newenergy.com>, "Andrea Weller
      (E-mail)" <aweller@sel.com>, "andrew Chau (E-mail)"
      <anchau@shellus.com>, "Bill Chen (E-mail)" <bchen@newenergy.com>,
      "Douglas Oglesby (E-mail)" <doao@chevron.com>, "Jeffrey Hanson
      (E-mail)" <jeff.hanson@phaser.com>, "jennifer Chamberlin (E-mail)"
      <jnnc@chevron.com>, "john Barthrop (E-mail)"
      <jbarthrop@electric.com>, "John Leslie (E-mail)" <jleslie@luce.com>,
      "Joseph Alamo (E-mail)" <jalamo@enron.com>, "Kathleen Magruder
      (E-mail)" <kmagruder@newpower.com>, "Marcie Milner (E-mail)"
      <Marcie.Milner@enron.com>, "'Michael Nelson'" <mnelson@electric.com>,
      "Mona Petrochko (E-mail)" <mpetroch@enron.com>, "Peter Bray (E-mail)"
      <pbray@newpower.com>, "Rebecca Schlanert (E-mail)"
      <rschlanert@electric.com>, "Richard Counihan (E-mail)"
      <rick.counihan@greenmountain.com>, "Sue Mara (E-mail)"
      <smara@enron.com>
cc:   "Beiser, Megan" <Megan.Beiser@edelman.com>, "Allen, Stevan"
      <stevan.allen@edelman.com>, "Manuel, Erica"
      <Erica.Manuel@edelman.com>, "Warner, Jami" <jami.warner@edelman.com>,
      "Fairchild, Tracy" <tracy.fairchild@edelman.com>

Subject:  FW: Interview w/LA Times/Edelman PR Contact List/Tomorrow Consume
      r Advocates Announce Their Energy Plan


I shall try this again--with the attachment this time.

>  Hello to the ARM Team,
>
> Peter, Rick and Mona did an excellent job briefing LA Times reporter
Nancy
> Vogel on retail energy markets, ARM and ARM's recommendations for changes
> to the current retail markets.  She has just finished what she terms her
> "opus" on dereg and admitted that she has avoided retail up to now and
> said "but the fact that you guys came to see me means I can't do that
> anymore."  She was pleased to be the first reporter to be approached by
> the retail side of the industry to explain "our side of the story" and
> will definitely be in touch with ARM folks in the future regarding
> possible stories.
>
> Attached you will find your contact list for the Edelman team.  Please
> respond with your cell phone, pager and home phone #s as well as the
names
> of your assistant and his/her phone number, if applicable.  We are
> available to you at all times, so please do not hesitate to use the home
> phone numbers that we have provided if you find it necessary.
>
> Heads Up Announcement: California's consumer groups are banding together
> tomorrow for an 11 a.m. Capitol Press conference in Room 1190 to make an
> announcement regarding dereg policy--it is assumed that they will be
> kicking off another initiative-though this has not been confirmed.
>
>  <<ARM Contact List.doc>>
> Tracy Fairchild
> Account Supervisor
> Edelman Public Relations Worldwide
> (916) 442-2331
> tracy.fairchild@edelman.com
>

(See attached file: ARM Contact List.doc)


 - ARM Contact List.doc