The CPUC is very aware that the utilities have gone to the legislature when 
the UDCs face elimination of some of the advantages that they have in the 
retail market.  We now have a fully-constituted commission (5 members) with 
two new democratic appointees with close ties to the governor.  This may 
empower the CPUC to take control of issues within their purvue, which 
ratemaking and the PX credit, clearly are.  Some members of the legislature 
are loathe to get into the CPUC's backyard and "micro-manage".  That being 
said, we still face significant risk within the legislature.  We have Steve 
Peace, who thinks a wholesale pass-through is adequate for competition, and 
Rod Wright, the chair of the Assembly Utilities and Commerce Committee, who 
sponsored a similar bill last year and who doesn't believe in retail 
competition either.  We have our work cut out for us.

Last year we fought essentially the same battle and defeated the utilities at 
attempts to include similar provisions into law for electricity.  We were 
able to do so because we had a broad coalition of supporters, including the 
environmental community.  Essentially, everyone opposed the utilities' 
proposals.

This year we have a different scenario.  SCE is attempting to peel off 
environmental groups by rolling in extension of the public purpose funding.  
They are also talking to the large consumers, who may perceive that they are 
able to get a better deal from the utilities by avoiding the mark-up.

However, it doesn't appear as though the utilities are united in supporting 
SCE's language.  We are actively attempting to revive the coalition that was 
so effective last year.  We are talking to the environmental groups to try 
and keep them in the fold.  This can be done by keeping the two issues of 
public purpose funding and competition as separate as possible.  

We have been encouraged to settle the PX credit case by the judge.  We are 
engaged in the beginning stages of settlement on the PX credit issue with 
SDG&E.  We are a long way from settling, however, if we are successful, the 
settlement would likely be precedential for both SCE and PG&E.  There is 
significant room between the utility proposals for the "retail" portion of 
the PX credit and what we are supporting.  We also appear to have the support 
of the ratepayer advocates.  We are attempting to get the customer groups to 
agree on an outcome, leaving the utilities isolated.  Adoption of our 
proposal for the full retail adder is a long-shot.

From a timing perspective, it is possible that we will resolve this issue at 
the PUC, before any legislation would become effective.  However, that would 
not prevent the legislation from estopping the CPUC decision.

We could use the help of the business units in providing documented 
information about the UDCs activities, if its available.  Customer accounts 
are very credible, however most customers are unwilling to do that.  We may 
also need some assistance from the business units in presenting testimony 
when these issues go to hearing before the appropriate committees.

We are working on this issue and will report on any developments.  Thanks.





Jim Badum
03/01/2000 06:22 AM
To: Roger Yang/SFO/EES@EES
cc: Kelly Cook/SFO/EES@EES, Bruno Gaillard/SFO/EES@EES, Thomas S 
Reichelderfer/DUB/EES@EES, Janel Guerrero/HOU/EES@EES, Lisa 
Mackey/SF/ECT@ECT, Jeff Brown/HOU/EES@EES, Douglas Condon/SFO/EES@EES, Martin 
Wenzel/SFO/HOU/EES@EES, Phyllis Anzalone/SFO/EES@EES, Harry 
Kingerski/HOU/EES@EES, Susan J Mara/SFO/EES@EES, Jeff Dasovich/SFO/EES@EES, 
Mona L Petrochko/SFO/EES@EES, Sandra McCubbin/SFO/EES@EES, Paul 
Kaufman/PDX/ECT@ECT 
Subject: Re: Re2: SCE Legislative Language  

So, what do we do to stop this...?



Roger Yang
02/29/2000 04:52 PM
To: Kelly Cook/SFO/EES@EES
cc: Bruno Gaillard/SFO/EES@EES, Thomas S Reichelderfer/DUB/EES@EES, Jim 
Badum/HOU/EES@EES, Janel Guerrero/HOU/EES@EES, Lisa Mackey/SF/ECT@ECT, Jeff 
Brown/HOU/EES@EES, Douglas Condon/SFO/EES@EES, Martin Wenzel/SFO/HOU/EES@EES, 
Phyllis Anzalone/SFO/EES@EES, Harry Kingerski/HOU/EES@EES, Susan J 
Mara/SFO/EES@EES, Jeff Dasovich/SFO/EES@EES, Mona L Petrochko/SFO/EES@EES, 
Sandra McCubbin/SFO/EES@EES, Paul Kaufman/PDX/ECT@ECT 
Subject: Re: Re2: SCE Legislative Language  

This is a blatant example of marketing on behalf of SCE.  Of course SCE does 
this stuff under the guise of Customer Education.  Do we have anything in 
writing provided by SCE that Enron Govt Affairs can provide to the CPUC as 
examples of marketing activities, whereby the costs of these types of 
activities should be unbundled from the distribution rate.

Of course there is no mark--up what so ever, because the cost of providing 
retail commodity is recovered in distribution rates.  Enron Govt Affairs is 
currently participating in a proceeding as part of a coalition to determine 
what this commodity cost adder should be.

Additionally, the reason there is no premium mark-up for risk management is 
because these costs are all pass throughs so there is no price certainty for 
the customer.  In fact, there will be price volatility from month-to-month, 
if not hour-to-hour.  We do not want to push this last point to much, to the 
extent that the customers rally at the CPUC to eliminate the volatility along 
with the price signals in favor of interclass and intertemporal subsidies.

Roger

  



Kelly Cook
02/29/2000 02:02 PM
To: Bruno Gaillard/SFO/EES@EES
cc: Thomas S Reichelderfer/DUB/EES@EES, Jim Badum/HOU/EES@EES, Janel 
Guerrero/HOU/EES@EES, Lisa Mackey/SF/ECT@ECT, Jeff Brown/HOU/EES@EES, Douglas 
Condon/SFO/EES@EES, Martin Wenzel/SFO/HOU/EES@EES, Phyllis 
Anzalone/SFO/EES@EES, Roger Yang/SFO/EES@EES, Harry Kingerski/HOU/EES@EES, 
Susan J Mara/SFO/EES@EES, Jeff Dasovich/SFO/EES@EES, Mona L 
Petrochko/SFO/EES@EES, Sandra McCubbin/SFO/EES@EES, Paul Kaufman/PDX/ECT@ECT 
Subject: Re2: SCE Legislative Language  

As you would expect, SCE is out telling customers that the proposed 
legislative language regarding default electric service is a done deal. The 
relevant text in Bruno's message below is as follows:

"SCE believes that the UDC should be the default provider and offer commodity 
at a pass through PX price with no adders."

Apparently, SCE is going one step further than a straight pass through of PX 
day ahead prices with no adders when in front of industry trade groups. A 
potential EES customer has told me that since 1/1/00, John Fiedler, Sr. VP of 
Regulatory Policy and Affairs for SCE, has spoken at both CMA and CLECA 
meetings and presented with great assurance that in the post transition 
period, SCE will purchase both long term and short term energy and pass 
through a blended wholesale energy cost with no mark-up to large, end-use 
customers.

My interpretation is that such an offering by SCE would put them in direct 
competition with ESPs. 

Kelly



Bruno Gaillard
02/16/2000 11:56 AM
To: Thomas S Reichelderfer/DUB/EES@EES, Jim Badum/HOU/EES@EES, Janel 
Guerrero/HOU/EES@EES, Lisa Mackey/SF/ECT@ECT, Jeff Brown/HOU/EES@EES, Douglas 
Condon/SFO/EES@EES, Martin Wenzel/SFO/HOU/EES@EES, Phyllis 
Anzalone/SFO/EES@EES, Kelly Cook/SFO/EES@EES, Roger Yang/SFO/EES@EES, Harry 
Kingerski/HOU/EES@EES
cc: Susan J Mara/SFO/EES@EES, Jeff Dasovich/SFO/EES@EES, Mona L 
Petrochko/SFO/EES@EES, Sandra McCubbin/SFO/EES@EES, Paul Kaufman/PDX/ECT@ECT 
Subject: Re: SCE Legeslative Language




SCE has submitted proposed legislative language at the California Legislation 
that will define the role of the utility. This language has not yet found a 
bill. However, in order to be prepared, Sandi McCubbin has asked me to 
forward the proposed  language for analysis. 

Bellow is a preliminary analysis of the bill and of our position. Please 
expand, edit and complete for legislative action. Please foward to 
appropreate people for comments.

Summary:

SCE is defining the basic electric service to include, Distribution, 
Metering, Billing, and Customer Service

SCE believes that the UDC should be the default provider and offer commodity 
at a pass through PX price with no adders.

Every customer will be charged a non-bypassable charge for basic electric 
service (customer charge) and a non-bypassable public goods charge (Energy 
efficiency, low income, R&D, and renewable charge). Renewable charge includes 
funding for production credits for renewable not under contract with utility, 
mandatory state purchase of renewable energy, minimum utility content of 
renewable energy, PX green product, Customer credit for Renewables not under 
contract with the utility.

DA customers can choose billing and metering services from their ESP and will 
receive an avoided cost credit from the UDC for these services.

Analysis:

SCE is trying to preempt through the legislation the role of the utility to 
be a Wires and Revenue Cycle Services (RCS) company. Furthermore they see 
themselves as being a default provider and offer electric commodity at the 
wholesale price, undermining any kind of competition from ESPs.

Their definition of what is included in the renewable credit again undermines 
any competition for ESPs in offering these products.

Furthermore, although SCE allows ESPs to offer metering and billing services, 
the credit ESPs can receive is based on an avoided cost. The CPUC is 
currently presiding over a proceeding, in which it is trying to unbundle RCS. 
At a minimum the credits for billing and metering services should be based on 
Long Run Marginal Costs.

Position: Actively Oppose

The UDC should be a wires only company. For a UDC, Basic Electric Service 
should only include the distribution of the electric power and should be 
renamed as Basic Electric Distribution Service. Revenue Cycle Services 
(metering, billing,..) should be unbundled from the distribution function. 
Costs allocated to these functions should be based, at a minimum, on a Long 
Run Marginal Costs or Embedded Costs. The Avoided Costs allocation does not 
represent all the costs associated with these services. 

The default provider function should be competitively bid out to ESPs and 
non-regulated affiliates. The UDCs should be out of the energy service 
business including all electric retail functions. The commodity charge for 
default customers should include the PX price, all procurement related costs, 
and retail marketing related costs. 
   
Currently, the green market is the only viable market in CA for small 
consumers.  This proposal would eliminate the competitive market and ensure 
market-share dominance for UDC and PX. 

SCE's proposal would limit, or seriously restrict, the development of the 
market to only UDC-provided green products of PX-provided green products.  
This structure creates a subsidy for both the UDCs and the PX for green 
products, which would disadvantage competitive offerings for the amount under 
contract, providing the UDC with a guaranteed base-load of green-product 
demand.  The market available to competitors for green would be only the 
demand in excess of the base, for which customers (not ESPs) would receive a 
credit from the UDC for the incremental green demand.  Again, because the UDC 
would be in the position of doling out credits for green, they would still 
control that market.

Attached is a copy of SCE's draft language.