Hi, Jeff --

I'm so glad you called today and that I could run over to the FERC
meeting.  Always interesting!

Here are my notes -- I apologize in advance if they are a little
rough.  Over the past few years I've become a much faster typist than when
I write longhand.

Gov. Gray Davis
November 14, 2000
FERC Hearing in San Diego

Serious flaws in the energy market in California.  Rates are not reasonable
nor just.  Two points:

1.  Given FERC's findings, you must order refunds. If you don't, then what
was the point of the findings.  Believes FERC has the authority to issue
the refunds and called on them to order them sooner than later.
2.  Impose hard price caps and big caps that will protest consumers from
another anticipated crisis in summer 2001.

Davis said he believes that deregulation can work eventually, if market is
competitive and all parties act responsibly.  But he believes it will take
4-5 years to get to a competitive market.  Without the price caps, he
believes there will be a lot of unwarranted pain inflicted on the consumers
and businesses of CA.

He said there is no justification for the huge profits the energy companies
netted in the third quarter.  He said he won't stand to allow CA companies
to be brought to their knees.  The market is dysfunctional.  People in SD
believe the marketplace is being manipulated for obscene profits.  Wants to
level off dereg for 4-5 years to allow market to work and for more power
plants to come online.

He said he believes in people making money and that dereg can work -- but
only when it's competitive.

Strong belief in wholesale price caps.  Angry that FERC stripped CA ISO's
ability to protect consumers against price spikes.  He said FERC's plan is
a reckless deregulation experiment and that the Commission's plan will only
make things worse next summer. Davis asked FERC to modify its order.

He said that FERC doesn't believe that CA can get the plants
online.  Doesn't blame them given the history of CA, but that he has taken
measures to speed up from 1 year to 6 months to site new plants.  He's
allocated $50 million from the general fund and $500 million for demand
reduction, renewables and conservation programs.  He believes he can reduce
demand and increase supply without public health risks or environmental
degradation.

He said he wants to have someone accountable/electable to the ISO and the
Power Exchange Boards, that the state should have the right to include
people from CA on those Boards.  He talked about the negative effects the
actions in CA will have on other states watching this "great deregulation
experiment."

He said FERC's proposed solution does nothing to lower prices.  To the
contrary, it's to bring businesses and consumers to their knees.  And Davis
predicted "a ratepayers revolt that will strip FERC of its authority and
take matters into their own hands."  He said he believes strongly that FERC
has the remedies to protect consumers, give them rebates and prevent this
from happening again.

He said if FERC just focuses on getting more plants online, all hell is
going to break loose. That FERC can't sit in Washington, 3,000 miles away
and take action on CA -- that will only cause more problems.

Dana speaking again --  If any of this doesn't make sense or you have
additional questions, please let me know. I have a few things scribbled in
the margins that may help piece it together better.

Again, thanks for the opportunity to help.  I look forward to talking to
you again soon.

Best,

Dana


Dana Perino
dana@gablegroup.com
619-234-1300 ext. 238