First cut response to Jim's message - see below.  Please respond to me ASAP.

ISSUE:  Enron's PX credits with SCE of $---- million may be "stranded" if a PUC proposed decision is approved, as is expected to occur Thursday, June 28.

SCE stopped making PX credit payments January 5, 2001, supposedly because of its financial situation.  SCE asked the PUC for authority to reflect the accumulated credits on the customer's bill, and suspend any cash payments of such credits  The proposed decision grants this request.

SCE has also asked the PUC to formally clarify the manner in which PX credits are calculated.  Prior to January 19, 2001, the PX credit was based on the actual Power Exchange clearing prices.  On January 19, 2001, the Power Exchange effectively stopped operations.  SCE's proposal is to determine the PX credit post-January 19, 2001 as the weighted average of its own retained generation and QF contract costs.  The PUC has not yet said when it would rule on this issue.  Enron's position before the PUC is that the credit should continue to be based on a market measure, like NP 15 and SP 15 indices.

Enron's P X credits with SCE could become "stranded" if they are interpreted to accrue to the account of the individual customers receiving service and not Enron.   Once Enron's customers were re-sourced back to the utility, new account numbers were established for these accounts.  This creates a loophole which allows SCE and the PUC to interpret the accumulated credits as applying to specific customer accounts and not to services purchased by Enron. 

Core Issues for a settlement with SCE on PX credit issue:

Cash payment of owed PX credits through January 18, 2001.  (For Enron, this is $123 million.)

Agreement to use SCE-proposed method of PX credit calculation starting January 19, 2001.  (Enron drops market proposal.)

PX credits accrued starting January 19, 2001 can be paid in the form of bill credits to any account so designated by the Energy Service Provider for receipt of such credits.  (Enron credits are transferable to services rendered for other Enron customers.)
 
Other SCE debts (????) are not called in immediately.





	James D Steffes 06/24/2001 10:20 AM 	   To: Harry Kingerski/NA/Enron@Enron, Susan J Mara/NA/Enron, Robert C Williams/Enron@EnronXGate, mday@gmssr.com  cc: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron  Subject: ATTORNEY CLIENT PRIVILEGE - CPUC Decision	


Harry & Sue --

Please work with Mike Day on Monday am to develop the following -

1.	Outline of a proposed SCE - Enron - WPTF Stipulation that resolves SCE's request for suspension of payment of PX Credit.
2.	Talking points for Jeff Skilling to call Bryson to discuss.

Get these to Skilling through Rick early Monday so that he can call.  Skilling is going to try and convince SCE to settle and not let the CPUC decide this issue.

I know it's a long-shot on getting a deal done and before the CPUC on Wednesday, but this may be our last best hope to hold this element of the Proposed Decision.

Call me on Monday am to discuss (I'll be in DC).

Thanks,

Jim