Maybe you guys were, but I wasn't aware that DWR was doing this.  Thus, the 
IOU default on the ISO grows.
Sue

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 02/08/2001 11:11 AM -----

	"Ronald Carroll" <rcarroll@bracepatt.com>
	02/08/2001 11:05 AM
		 
		 To: <acomnes@enron.com>, <jdasovic@enron.com>, <jsteffe@enron.com>, 
<mary.hain@enron.com>, <smara@enron.com>
		 cc: 
		 Subject: Fwd: DJ Calif/Power Purchases -2: DWR Ducking Its Duty -Reliant


----- Message from "Tracey Bradley" <tbradley@bracepatt.com> on Thu, 08 Feb 
2001 09:19:53 -0600 -----
To:	"Paul Fox" <pfox@bracepatt.com>
cc:	"Andrea Settanni" <asettanni@bracepatt.com>, "Jeffrey Watkiss" 
<dwatkiss@bracepatt.com>, "Ronald Carroll" <rcarroll@bracepatt.com>
Subject:	DJ Calif/Power Purchases -2: DWR Ducking Its Duty -Reliant
FYI - Testimony at the court hearing yesterday revealed that the DWR is 
making the California ISO cover the difference between the real-time power 
DWR finds appropriately priced and what the state needs to buy to prevent 
blackouts.  The purchases by the ISO will then be billed to the state's three 
IOUs, two of which are not paying their bills.  

DJ Calif/Power Purchases -2: DWR Ducking Its Duty -Reliant 
Copyright , 2001 Dow Jones & Company, Inc. 



The issue came up in hearings on a lawsuit filed by the California 
Independent System Operator, which runs the state's transmission grid, 
against Reliant Energy (REI), which wants to be allowed not to sell power to 
California if the state won't guarantee that it will be paid. 

     Reliant is concerned that it won't be paid for power being bought by the 
ISO on the utilities' - rather than the DWR's - behalf. 

     "We're willing to sell to the DWR, but they're not willing to step up to 
the plate," said Terry Houlihan, an attorney with Reliant. "The DWR has money 
for short- and long-term power purchases. It can avoid the situation if it 
does what the state Legislature said. Then there would be no need for a 
restraining order." 

     The court issued a restraining order Tuesday night requiring Reliant to 
sell power to California Wednesday, then extended the order for another day 
Wednesday night. 

     The rapidly deteriorating creditworthiness of PG&E Corp. (PCG) unit 
Pacific Gas & Electric Co. and Edison International (EIX) unit Southern 
California Edison first left generators unwilling to supply power to 
California in mid-December, when the U.S. Department of Energy intervened 
with an emergency order requiring suppliers to deliver spare power to 
California on demand. 

     That order was extended several times, but expired Wednesday. 

     Last week, the California state Legislature moved to secure the state's 
power supplies by passing a bill authorizing the DWR to enter into contracts 
to buy power and to finance those purchases by selling billions of dollars in 
bonds. 

     The idea was to shift power purchases to a buyer with better credit than 
the utilities. While the bill didn't make the department responsible for 
covering the state's power needs, the clear message from the governor, the 
Legislature and the DWR was that the department would secure the power the 
utilities couldn't buy on their own. 

     That apparent mission might have been altered in the face of the state's 
own mounting power bills, Maviglio said. The DWR has spent $40 million to $50 
million a day buying power and has consumed around $750 million since it took 
over the job in earnest on Jan. 17. 

     According to testimony at Wednesday's hearing, the DWR has left it to 
the California ISO to cover the difference between the real-time, or 
emergency, electricity it finds appropriately priced and what the state needs 
to buy to keep the lights on. 

     The ISO, in turn, has been billing the state's three investor-owned 
utilities for power it buys to cover the needs of their customers. 

     "In emergency dispatches, the DWR has not agreed to pay a certain 
price," said Jim Detmers, and operations officer at the California ISO. "If 
the DWR does not agree that it will pay a certain price, then it will not 
procure that power. The ISO will be forced to procure it. Then the ISO will 
bill the utility wherever the power is needed." 

     The utilities have together defaulted on hundreds of millions of dollars 
in debt service obligations and power bills, and have said they would already 
have run out of cash had they paid their bills on time. 

     The volume of power left over by the DWR wasn't known. 

     A spokesman for Southern California Edison said that, to date, the 
utility is unaware that it's being billed for ongoing power purchases. 
Pacific Gas & Electric wasn't available for comment. 

     The ISO normally bills for power up to 60 days after it's delivered. 

     The California Electricity Oversight Board, which oversees the 
operations of the ISO, dismissed the generators' concerns, saying they were 
threatening to withhold supply to gain leverage to force the DWR to sign 
long-term contracts at high prices. 

     The ISO, however, indicated that credit concerns remain an issue. 

     "The credit issue is an ongoing problem," Detmers said. "Some generators 
have indicated they would not supply California, because they are not being 
paid." 

     Steve Fleishman, an analyst at Merrill Lynch, said California needs to 
take steps to alleviate those concerns. 

     "In the end, there has to be a creditworthy party and someone who is 
willing to pay to backstop this situation," Fleishman said. 

     Said Reliant President and Chief Operating Officer Joe Bob Perkins in 
letter to Gov. Davis Tuesday night, "Unless an immediate change in direction 
occurs, the California ISO and the Department of Water Resources have set the 
stage today for a return to credit-driven blackouts in California." 

     The ISO argues that Reliant has contractual obligations to continue 
supplying power to California. 

     -By Jason Leopold, Dow Jones Newswires; 310-666-9986; 
mailto:jason.leopold@dowjones.com(Andrew Dowell in New York contributed to 
this article.) 

      

     (END) Dow Jones Newswires 08-02-01