On item #1, I don't believe they have the latitude through an application to 
change the statute language.  However, that is not our issue to raise.  I 
don't believe we have a problem with items #2 and 3.  On item #4, I also 
don't think we should be raising this, but I think it is a loser to say, "we 
keep all the upside and pass through all of the downside". 

The only thing we may wish to protest is the amortization of any 
undercollected balance in 18 months.  Considering the potential size of the 
undercollection, that quick a recovery could raise prices significantly and 
affect our deals.  Also may be rate shock. 

We have 30 days from October 24 to file comments.  Let me know any other 
thoughts
---------------------- Forwarded by Mona L Petrochko/NA/Enron on 11/02/2000 
07:04 PM ---------------------------


JMB <JBennett@GMSSR.com> on 10/27/2000 05:58:52 PM
To: "'ARM@PHASER.COM'" <ARM@PHASER.COM>
cc: MBD <MDay@GMSSR.com> 

Subject: SDG&E Application to Implement AB 265

On October 24, 2000, SDG&E applied to the Commission for an order
implementing Assembly Bill 265.  SDG&E states that while Commission Decision
00-09-040 implemented the rate ceiling required by that bill, it did not
take any additional steps to "protect against a simple deferral of payment
by future customers," consistent with AB 265 Section 1(b).  Accordingly,
SEDGE requests that the Commission take the following additional steps:

1. Establish a rate freeze (as oppose to a ceiling) of 6.5 cent/kWh.  SDG&E
estimates that a freeze will result in an undercollection of approximately
$500 million through 2002 instead of the $630 million undercollection which
a rate ceiling will generate.

2.  The Commission should authorize SDG&E to use all the financial and
physical tools available in the marketplace to procure energy for bundled
service customers.  

3.  The Commission should provide guidance for SDG&E's exercise of its
procurement function (e.g., price stability v. least cost procurement).

4.  In implementing Section 332.1(c), which requires SDG&E to "utilize
revenue associated with sales of energy from utility owned or managed
generation assets to offset any undercollection" resulting from the rate
ceiling/cap, the Commission should (a) preserve the historic allocation of
such revenues (which is approximately 60% to customers below 100 kw and the
remainder to those above) by requiring that SDG&E only apply 60% of these
revenues to such undercollection, and (b) not require SDG&E to use revenue
from post-AB 1890 power purchase contracts to offset the undercollection
resulting from the rate ceiling/cap.

5. Allow SDG&E to amortize any remaining undercollection resulting from the
rate ceiling/cap in no more than 18 moths after that ceiling/cap ends.      


Please call if you have any questions.

If you would like a copy of the application, let me know (unfortunately I do
not have it on e-mail, but it is only 18 pages long). 


Jeanne