As we discussed during our last meeting, the Committee needs to address the
question of interim funding for CalPX from this point until the effective
date of the proposed Plan, which is estimated to be February or March 2002.
There is a hearing before the district court on December 3 to discuss the
CalPX's pending budget motion.  The Committee needs to be in a position to
provide the new district court judge the Committee's position on interim
funding for the CalPX at that Dec 3 hearing.  We have previously discussed
an approach that would provide interim funding as an advance from the
settlement reserve account pursuant to the approval of both the district
court and the bankruptcy court after notice has been provided to all
parties, including Participants.

The approach discussed below is, as we have discussed, predicated on the
fact that the bankruptcy judge and the US Trustee, as well as the district
court, expect the general unsecured claims of the vendors and suppliers to
be paid in full or settled in an agreed upon amount.  Committee counsel
continues to discuss a resolution of these unsecured claims with the
attorneys for the general unsecured creditors' committee and the CalPX's
counsel, but the claim of OM is still being addressed.  In the meantime, the
Committee has estimated that $8 million would be enough to resolve general
unsecured claims.

Here is a proposal the Committee should address at its next meeting on Nov
29, 2001 at 2 pm Pacific time:

Structure of interim funding.

As Michael Lubic suggested, the interim funding should be structured as DIP
financing from the settlement reserve account to the CalPX, with repayment,
if any, to come from any excess funds available from whatever source there
may be at the CalPX, after all other obligations are satisfied in accordance
with the Plan.  Of course, there may not be any other source of funds, but
we should make sure that if there are recoveries on the bond or
commandeering litigation, or anything else for that matter, those recoveries
are used first to replenish the settlement reserve account for funds
advanced for interim funding.  It should be pointed out that the recoveries
on the bond or commandeering litigation may belong to the settlement reserve
account in any event, but this structure will ensure that if there are any
disputes over that, at least the amounts advanced will be repaid.  It should
also be pointed out that the advance from the settlement reserve account has
no effect on and does not make any determination of the allocation of the
funds in the settlement reserve account or the parties entitled to such
funds.  That is not being addressed by the interim funding.

Therefore, the interim funding will be accomplished through a motion for
approval of the DIP financing under section 364 of the Bankruptcy Code, on
notice to all participants and ISO scheduling coordinators, creditors, etc.

Any amount of the interim funding that is not utilized as of the effective
date of the Plan (estimated for Feb or March 2002), will be used first to
establish the reserves described in the Plan.

Amount of interim funding.

As indicated on the attachment to this email, the amount that needs to be
reserved is $10.2 million, with the understanding that every effort will be
made to economize on all operating and legal expenses so that the amounts
actually incurred and spent will be significantly less than the interim
funding reserve.  This is not the actual budget, which will be substantially
lower than the reserve, but rather is a set aside to ensure that if the
funds at the CalPX, including those in the settlement reserve account are
actually disbursed, there will be sufficient funds to cover all expenses.

It should be noted that the $10 million operating reserve the Committee
agreed to in the proposed Plan can be reduced by $2.5 million to $7.5
million to account for the fact that the $10.2 million interim funding
reserve includes about $2.5 million of expenses that were also in the Plan's
$10 million reserve.  Similarly, the $7.8 million reserve proposed for the
bond and commandeering litigation can be reduced by $1 million because that
budget includes about $1 million of expenses that will be included in the
interim funding reserve.

The $10.2 million of interim funding will actually come from the interest
that is earned on the settlement reserve account from October 2001 through
March 2002, approximately $6.3 million (estimated at about $900,000 a
month), plus $3.9 million of the approximately $7 million in interest that
was earned on the settlement reserve account prior to from March to October
2001.

Total reserves.

Again, it should be emphasized that the proposed reserves are not budgets.
The reserves are intended to be safety nets that account for "worst case"
delays and expenses and that will allow for the distribution of funds on
hand in excess of the reserves as soon as possible (when a court or FERC
allows) without the concern that the parties that receive the distributions
may be asked to put additional funds back in to fund additional expenses.
The actual budgets that should be  acheived, if not exceeded, are the "best
case" scenarios that we have discussed during our Committee calls.  We
expect to operate under that "best case" scenario once the Plan is
confirmed, and the sooner the Committee selects a new manager that can start
the transition process, the sooner we should be able to influence a
reduction in expenses at the CalPX even before the Plan becomes effective.
Until that occurs, the CalPX continues to operate at the level we are
seeking to reduce.

However, the total "worst case" reserves would consist of the following:

Interim funding through March 31, 2001				$10.2 million
Plan operating reserve through December 31, 2004		$  7.5 million
Plan litigation reserve through December 31, 2004		$  6.8 million
Total									$24.5 million

This is far better than the $30 million to $40 million that the PX was
proposing.

Please be prepared to resolve these funding issues at our meeting on
November 29, 2001.  Thanks.








 - Reserve for Estimated Interim Funding for CalPX Nov 22 01.doc