Steve -- I believe that the note from Dan below responds to your request  for 
an outside counsel response concerning the appliability of recent FERC refund 
orders to bilateral transactions, including sales to the California Dept. of 
Water Resources (CDWR).  Let me know if you would like a formal opinion 
letter or if there is anything else I might do for you.  Later Joe  
202.466.9150
----- Forwarded by Joe Hartsoe/Corp/Enron on 03/14/2001 09:57 AM -----

	"Jeffrey Watkiss" <dwatkiss@bracepatt.com>
	03/14/2001 09:31 AM
		 
		 To: <jhartso@enron.com>
		 cc: "Ronald Carroll" <rcarroll@bracepatt.com>
		 Subject: Sales to CDWR


The $150 "soft price" cap that FERC adopted in its December 15 order applies 
only to sales of power into the California ISO market and California PX 
day-aheadand day-of markets.  These are the real-time and short-term markets, 
respectively.   By the terms of the December 15 order, the cap does not apply 
to any bilateral transactions, including sales to the California Dept. of 
Water Resources (CDWR), which are generally for longer terms.

Given the instability of the California market, the current applicability of 
the cap may change in the future.  In a recentlly released report, FERC staff 
recommends that the cap be discontinued after April 2001 and replace by a 
series of other measures to mitigate market power.  Thes include a marginal 
cost price cap on sales into the ISO by sellers who are party to the 
participating generator agreement.

Although unlikely, it is not inconceivable that someone in the future might 
argue that the role currently being performed by CDWR is in some respects the 
same role as was formerly performed by the PX.  Based on that proposiiton, it 
might be argued that a price cap similar to the "soft price" cap  be imposed 
on sales to the CDWR.