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> -----Original Message-----
> From: MDay
> Sent: Friday, May 11, 2001 3:27 PM
> To: 'Kristen Bird'; 'awu@quinnemanuel.com'; 'Richard.Sanders, Enron';
> 'Robert.C.Williams@ENRON.com'
> Cc: JBennett
> Subject: Direct Access Legislation and the impact on Settlement
> Discussions with UC/CSU
>
> Richard Sanders and Bob Williams asked that I provide the following brief
> memo in order to summarize wherer the legislative efforts are at this time
> and how they might impact settlement discussions.
>
> With the close of the first extraordinary session today, a second
> extraordinary session will open on Monday and all the existing but
> unpassed bills will be reintroduced--so we are told.  That means there
> will continue to be at least 2 bills which would substantially protect the
> rights of customers to choose direct access, although both contemplate
> that under varying circumstances the customer could be required to pay an
> exit fee.
>
> What is relatively likely is this:
>
> A direct access bill will pass this session.  It will likely create the
> following situation:
>
> Any customer who has not been on direct access continuously since before
> January 17, 2001 will have used some power purchased by DWR while being
> charged bundled utility rates far lower than the actual cost.  If these
> customers (like UC) eventually elect to return to direct access they WILL
> be required to pay the shortfall that has accrued while they were on
> bundled service.
>
> Other stranded costs which may be incurred by DWR after the customer
> leaves bundled service for direct access may also be passed on in an exit
> fee.  This would include stranded contract costs if DWR has contracted for
> more long term power than it has customers, as well as any costs related
> to the bond financing intended to pay for the long term power contracts.
> We HOPE that the legislation will have a provision excusing the customers
> from such an exit fee if DWR has not purchased all the net short power by
> long term contracts and DWR can match its supply to the new lower demand
> simply by reducing daily spot purchases.
>
> UC would potentially face the first type of exit fee in any event, it may
> face the second, although there is a possibility of a short "open
> enrollement" period following passage of the bill, which would allow
> customers to switch to DA immediately without paying the second type of
> exit fee.
>
> There may be other exceptions to the exit fees for customers who install
> self generation or distributed generation.  This might affect a few UC
> campuses, but not all.
>
> At least one of the bills might give the CPUC enough discretion to permit
> it to impose onerous conditions on direct access and thereby prohibit it.
> However, this provision is strongly opposed by many customer groups and we
> believe it can be defeated.
>
> We do not know when the direct access legislation will be adopted.  We
> hope within the next month.  We will keep you advised, and please feel
> free to call for an update at any time.
>
> Mike Day