It looks like SCE is proposing to increase frozen rate levels by 10% on 
January 1, 2001.  SCE also recognizes TURN's proposal that the TCBA and TRA 
should never have been artificially segregated, but criticizes it as a 
short-term solution that puts utilities' at significant risk.  The major 
problems I have with PG&E and SCE's attitude are:

They are trying to renegotiate the AB1890 compact after viewing history;
As TURN has pointed out, they are only focusing on their undercollections and 
not overcollections;
They believe that they were able to extend the rate freeze at prices above 
market when wholesale prices were low, yet end the rate freeze when prices in 
the wholesale market are high resulting in an immediate rate increase.  Where 
were the utilities' risk in CTC recovery?
There is no discussion how direct access will be impacted; however, we must 
be careful that they are trying to move away from the current PX crediting 
mechanism; and
They ignore how much CTCs they have recovered to date.

As you know, we believe the rate freeze under the current mechanism must be 
maintained until the statutory date of December 31, 2001.  Although a 
surcharge mechanism may be an appropriate solution, it should be implemented 
after December 31, 2001 and managed in a way to avoid sticker shock.  If cash 
flow is an issue for the utilities, who were getting large sums of cash 
inflow prior to the wholesale price run-ups, then securitizing an accounts 
receivable may be a good solution.  In short, AB1890 should be preserved 
through 2001 per TURNs recommended ratemaking accounting treatment.  We 
should be amenable to a solution that allows utilities to recoup some of the 
undercollections past December 31, 2001, if necessary through securitazion.  
However, perhaps the amount of recovery may need to be discounted to reflect 
an appropriate sharing of risks between ratepayers and utility shareholders.  
We probably do not want to be out in front on this issue, so we should 
probably work through other parties such as TURN, CLECA, and CMA.

Roger 
---------------------- Forwarded by Roger Yang/SFO/EES on 10/26/2000 09:06 AM 
---------------------------


"Daniel Douglass" <douglass@ArterHadden.com> on 10/25/2000 06:25:09 PM
To: <jdasovic@enron.com>, <mpetroch@enron.com>, <Roger_Yang@enron.com>
cc:  
Subject: Edison Prehearing Conference Statement Filed



The following is a summary of the attached Edison prehearing conference  
statement filed this afternoon in the proceeding dealing with its Petition 
for  Modification of the end-of-the-rate-freeze decisions:
?
Edison says there are There are four key elements to managing the  situation:

Support market reform, including providing greater freedom for  utilities
to contract for longer term supplies of power, completing review  of SCE,s
bilateral contract proposals, and urging other agencies to help  rectify the
market structure problems that have become apparent.
Confirm that the utilities will be permitted to recover their  reasonable
procurement costs incurred on behalf of customers.
Protect customers by implementing a post-freeze rate stabilization  plan
instead of the current plan which directs immediate pass through  of
volatile wholesale power costs. This should include a modest  near-term
energy rate increase of around 10% in the interest of avoiding a  much larger 
rate
increase in 2002 and thereafter.
Promptly decide whether the Commission is going to permit the sale  of
the utilities, remaining generation assets. If the answer is &no,8  then
fundamental changes in the implementation of electric  restructuring
would have to be considered. Either way, all parties need  the
Commission,s answer to this key question as soon as possible.

Interestingly, Edison says that, "Based on the valuations SCE has filed for  
our hydro facilities, Palo Verde, Mohave and Four Corners (no one has argued  
that these valuations are too high), our stranded costs (for the purpose of  
Section 368(a)) were recovered no later than
mid-August  2000. The Commission should approve our pending plant valuations 
as  soon as possible so that the Commission can put in place a reasonable  
ratestabilization plan, including a modest energy rate increase beginning in  
January 2001, to deal with the necessary costs of procuring power." 
[emphasis  added]
?
The procedural schedule proposed by Edison is as follows:

Prehearing Conference October 27, 2000
Comments on the SCE and PG&E Petitions to Modify due October 30,  2000
End of rate freeze tariffs and rate stabilization plan filed November 14,  
2000
Briefs on sale of remaining utility generation assets. November 17,  2000
Decision on SCE and PG&E petitions to modify November 21, 2000
Comments on end of rate freeze tariffs and rate stabilization plans due  
November 27, 2000
Reply Comments due December 4, 2000
Proposed Decision issued December 14, 2000
En Banc Oral Argument December 20, 2000
Special Commission meeting (Decision adopting end of rate freeze tariffs  and 
rate stabilization plans) December 28, 2000
New rates effective as of: January 1, 2001 


 - PHC STATEMENT-SCE_1.PDF