Steve:

I'm not sure how far along you are with the comments, but California's 
insistence on micro-managing utility purchases is really standing in the way 
of developing a competitive, functional market.  The prospect of having Ms. 
Lynch in particular and the State of California generally as a counter party 
in every transaction is a huge disincentive for the utilities to transact.  
(Though the situation in California has now put the utilities into a "damn 
the torpedoes" mode and persuaded them to transaction despite the regulatory 
risk.)

Clearly, the first best answer is utility-out-of-the-merchant-function.  But 
given the political climate in California, we're likely to have the utility 
in the role of buyer, at least in the near term.  For the market to work in a 
structure with utility as buyer, the CPUC and California need to get out of 
the way. Otherwise, it's a never-ending quagmire.

A couple of PUCs ago, the CPUC set up an incentive mechanism for utility gas 
procurement.  Under that mechanism, a benchmark is set.  If the utility beats 
the benchmark, it shares the benefits with consumers.  If it does worse than 
the benchmark, it shares the pain with consumers.  It's a model that works, 
that's simple and that's compatible with competitive markets.  It ain't 
perfect, but it's head and shoulders above the regulator-as-counterparty that 
the current PUC has put in place.

Given the brief time you'll have, there may be other more critical issues, 
but this one is getting increasing attention out here in the land of lunacy.

Jeff



	Steven J Kean
	Sent by: Maureen McVicker
	11/07/2000 02:26 PM
		 
		 To: Paul Kaufman/PDX/ECT@ECT, Tim Belden/HOU/ECT@ECT, Richard 
Shapiro/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Susan J 
Mara/SFO/EES@EES, Sandra McCubbin/NA/Enron@Enron, David Parquet/SF/ECT@ECT, 
Mary Hain/HOU/ECT@ECT, Joe Hartsoe/Corp/Enron@ENRON, James D 
Steffes/NA/Enron@Enron, Sarah Novosel/Corp/Enron@ENRON, Peggy 
Mahoney/HOU/EES@EES
		 cc: 
		 Subject: FERC preparation conference call

 Although I realize some of you may not be able to join on such short notice, 
please try to participate in a conference call in preparation for the FERC 
meeting on Thursday.  I'd really like to have your input.

Date:   Wednesday, November 8
Time:   10 a.m. CST
Call in #:  888-422-7132
Host Code:  239900
Participant Code: 491703