Jim.  I like your suggestions and suggest the following enhancements:
We should integrate this solution into the CPUC process. ie Keep rate freeze 
in effect until the Mar 02.  Make state agency take over as ESP to all 
bundled customers at 110% of frozen rate.  This solution keeps the current 
Rate Freeze in place and keeps us in the game to not lose our negative ctc.  
It also corresponds to your minimal changes goal.  It also puts government 
agency in the same place as us in having exposure to negative ctc as us.  It 
also accomodates the problem of RFP's taking longer than expected.  It also 
solves the liquidity problem immediately and avoids the need for 
forbearance.  And furthermore it keeps the utility exposed to bankruptcy 
which minimizes their negotiating power.
I don't understand how this proposal addreses what happens with the existing 
assets of PG&E.  The worry I have is that PG&E gets to keep 50% of the 
benefits of nuclear sales and 10% of the benefits of hydro sales, post rate 
freeze.  If we damage 1890, the utilities are now in the drivers seat.
re "ESPs should be able to buy from UDCs at the current weighted average 
generation rate from 1/1/01 ) 12/31/02 to serve any competitive load in 
California"  This suggest a replacement to AB 1890 which suggests significant 
changes.  Would it not be better to say "After the rate freeze, the 
government entity would take over the obligations of PG&E and continue them 
to the end of 2002.  Such assumption and continuation, would be combined with 
the government entity recieving the benefits of  the difference between 
market prices and embedded costs of the SCE/PG&E existing generation assets.

Summary of Solution that incorporates these suggestions
Government entity becomes an ESP taking over all customers not served by 
another ESP.
Government accepts any ESP's that come back within 3 weeks.
Utilities stopped from selling any additional nuclear, hydro, thermal or QF 
generation. (requires change in legislation)
Utilities provide surcharge/credit, for the lessor of 40 years or retirement, 
based on the difference between generation COS and market value to all ESPs, 
after rate freeze ends (requires change in legislation and settlement).
Government entity, as ESP,  charges Frozen Rate plus 10% until the end of 
2002.
Government entity, assures all ESP that they will their costs will not exceed 
110% of frozen rate until the end of 2002.
Rate freeze and surcharge continue until the end of March 2002.
Any shortfall of agency would be recovered through a amortization over the 
next 15 years with securitization less positive proceeds from auctioning 
default provider. (requires change in legislation)
Government commit to building 10,000 MW of generation by summer of 2002
Government commit to allowing emmission constrainted generators to buy 
emission credits
Goverment change legislation to allow swift DSM activity



From: James D Steffes@ENRON on 01/11/2001 10:42 PM
To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Mark 
Palmer/Corp/Enron@ENRON, Michael Tribolet/Corp/Enron@Enron, Harry 
Kingerski/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Susan J 
Mara/NA/Enron@ENRON, Joe Hartsoe/Corp/Enron@ENRON, Sarah 
Novosel/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON, Alan 
Comnes/PDX/ECT@ECT, Mary Hain/HOU/ECT@ECT, Paul Kaufman/PDX/ECT@ECT, Sandra 
McCubbin/NA/Enron@Enron, Roger Yang/SFO/EES@EES, Scott Stoness/HOU/EES@EES, 
Robert Badeer/HOU/ECT@ECT, Tim Belden/HOU/ECT@ECT, Stephen Swain/PDX/ECT@ECT, 
Travis McCullough/HOU/ECT@ECT, Andre 
Cangucu/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Shelia Benke/Corp/Enron@Enron, 
Vicki Sharp/HOU/EES@EES, Wanda Curry/HOU/EES@EES, Don Black/HOU/EES@EES, 
Gordon Savage/HOU/EES@EES, Donna Fulton/Corp/Enron@ENRON, William S 
Bradford/HOU/ECT@ECT
cc:  
Subject: Financial Analysis of PG&E and Proposed Terms for Settlement

Attached please find three documents that outlines the economics of LT 
contracting necessary for PG&E and SCE.  Also find some thoughts on elements 
of a workable settlement.

Call me with any questions.

Jim






Scott Stoness
01/11/2001 05:09 PM
To: James D Steffes/NA/Enron@ENRON
cc: Don Black/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron 
Subject: Re: Treasury (keep PG&E) Solvent Strategy  

Great idea.  My strategy was solve the immediate problem of solvency quickly 
by getting the government to step in while the rules of the RFP are defined, 
then do the auction, but if you think we could go straight to an RFP for 
standard offer without going bankrupt, I would be for it.

I believe that we do not have time for an RFP (6 months) so that we should 
get the government entity to step in to give us the time.

And auction by rate class would be good but noone would want the large 
classes because their rate increase will be higher and they will be less 
likely to stay.

Scott


From: James D Steffes@ENRON on 01/11/2001 03:25 PM
To: Scott Stoness/HOU/EES@EES
cc: Don Black/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron 
Subject: Re: Treasury (keep PG&E) Solvent Strategy  

What about something different?

If we asked for an Auction by rate class that would allow a different company 
to market the default service.  The competitive bids would be used to reduce 
the overall undercollection.  So in your ST point #1, replace Government 
entity with a Competitive ESP that has paid the most to win that right.

Jim




	Scott Stoness@EES
	01/11/2001 02:39 PM
		 
		 To: James D Steffes/NA/Enron@Enron
		 cc: Harry Kingerski/NA/Enron@Enron, Don Black
		 Subject: Treasury (keep PG&E) Solvent Strategy

Solution
Government entity becomes an ESP taking over all customers not served by 
another ESP.
Government accepts any ESP's that come back within 3 weeks
Utilities stopped from selling any additional nuclear, hydro, thermal or QF 
generation.
Utilities provide surcharge/credit, for the lessor of 40 years or retirement, 
based on the difference between generation COS and market value to all ESPs, 
after rate freeze ends.
Government entity, as ESP,  charges Frozen Rate plus 10% until the end of 
2002.
Government entity, assures all ESP that they will their costs will not exceed 
110% of frozen rate until the end of 2002.
Rate freeze and surcharge continue until the end of March 2002.
Any shortfall of agency would be recovered through a amortization over the 
next 15 years with securitization less positive proceeds from auctioning 
default provider.

Other:
Government commit to building 10,000 MW of generation by summer of 2002
Government commit to allowing emmission constrainted generators to buy 
emission credits
Goverment change legislation to allow swift DSM activity