Jeff Dasovich and I, along with several IEP members, met with Gov Davis' 
staff today, including his Chief of Staff, his Staff Director and two policy 
advisors on energy issues.  They made the following points:

The Governor is personally spending a great deal of time on electricity 
issues (and is forcing them to spend their time on it as well).
The Governor recognizes that part of the problem is a supply shortage, but 
they put special emphasis on the view that in addition to supply shortfalls, 
a big part of the problem is a "dysfunctional market" -- a thinly veiled 
reference to price manipulation by people sitting in the room.
The Governor's view is that all participants (regulators, utilities, 
customers and generators) must "behave responsibly".
Everyone must "share the pain".
The legislative battles are likely to start as soon as the legislature 
returns next week, and the Governor will be putting forth several legislative 
proposals in the next couple of weeks.
While staff went out of its way to say that the list of proposals (in the 
attached e-mail) were unofficial and for discussion purposes only, it was 
fairly clear that they defined much of what the governor plans to propose.

The meeting was not very encouraging nor did it provide much in the way of 
new information.  The IEP group was on message, making the usual arguments 
about the need for forward contracting, expedited generation and transmission 
siting, a real retail market to promote demand side responses, etc.  The 
staff is clearly focussed on forward contracting as part of the solution but 
remains committed to the idea that generators have to cough up some money and 
remain subject to rate caps, possible restrictions on sales outside the state 
(at least at peak times), etc.  One approach they appear to be toying with is 
a "share the pain" proposal which would have utilities absorbing some of the 
deferred costs and consumers absorbing some of the deferred costs in the form 
of higher rates.  That leaves generators ... who they might want to either 
agree to some refunds or provide power at lower going-forward prices.

The staff says that they remain open to proposed solutions, but the Davis 
administration appears unwilling to spend any political capital to fix the 
problem.  

I think we are in for a lengthy legislative and PUC fight.  We should, as 
always, provide consistent and reasonable solutions.  I think we should 
prepare a document for distribution to staff, legislators (and anyone else) 
that takes the factual background and proposed solutions we have put forward 
(eg in Belden's presentation and the Seabron Adamson whitepaper) and wraps 
them in a more political context.  In other words, we have already 
articulated the right answers; we now need to put a political rationale 
around our proposals -- a set of arguments which responds directly to the 
political opposition those answers are likely to encounter.  Jeff will follow 
up with one of the staff members in particular (Kari Dohn) and I would 
suggest that Jeff and Sandi work together on putting the necessary political 
rhetoric around the solutions we have proposed.




	Jeff Dasovich
	Sent by: Jeff Dasovich
	11/22/2000 04:00 PM
		 
		 To: skean@enron.com, Richard Shapiro/NA/Enron@Enron, Paul 
Kaufman/PDX/ECT@ECT, Sandra McCubbin/NA/Enron@Enron, Mona L 
Petrochko/NA/Enron@Enron, Susan J Mara/NA/Enron@ENRON, Joe 
Hartsoe/Corp/Enron@ENRON, Mary Hain/HOU/ECT@ECT, Sarah 
Novosel/Corp/Enron@ENRON, mpalmer@enron.com, Karen Denne/Corp/Enron@ENRON, 
Alan Comnes/PDX/ECT@ECT
		 cc: 
		 Subject: Options the Governor's Considering

Steve:  FYI.  Don't worry about the conference call, but thought it might be 
useful to review the proposals prior to Monday's meeting.

See you Monday.

Happy Thanksgiving to all.

Best,
Jeff

******************************************************************************
**************************************

Several IEP companies have been invited to a meeting with the Governor,s 
staff next Monday, November 27th.
The following are some options, which the Governor,s office is considering.  
IEP is doing some preliminary research on some of these topics.  IEP would 
like to arrange a teleconference call around noon on Monday, November 27th to 
discuss the Governor,s meeting.  Please advise us as to whether your have 
been invited, and who you are sending.
California,s electricity supply situation has two inter-related problems ) 
(1) high wholesale electricity costs, and (2) marginally adequate supply of 
generation ) both have combined to create a dysfunctional wholesale 
electricity market.  The goals should be:
 To assure reliable electricity to California consumers for the lowest 
reasonable cost.
o Consider requiring that all in-state generation be sold in state.
o Consider re-asserting state authority over the operation, maintenance and 
safety practices of all in-state generating facilities, for public health and 
safety purposes.
o Consider developing a state power authority to build generation and 
own/operate transmission.
o Consider requiring utilities both to retain existing and to build new 
generation.
o Consider providing utilities with authority to stabilize retail prices to 
be paid by consumers through development of an energy portfolio that reduces 
exposure to spot markets, including contracting forward for much more of 
their unmet power needs.
o Consider extending consumer rate freeze.
o Consider centralizing power plant dispatch like the other ISOs in the rest 
of the country.
o Consider eliminating the ISO and assigning its functions to either a state 
or private entity that can acquire the transmission facilities, and control 
the electricity transmission grid (MUNIs have proposed this).
o Consider sponsoring/supporting legislation to change the ISO and PX boards 
to increase accountability.
o Expand energy conservation programs focused both on immediate peak demand 
reduction and on longer term, broader-based programs.
o Aggressively work to site new generation and transmission facilities, to 
streamline permitting, and to develop renewable resources.
o Call for/sponsor federal FERC reform legislation that would:
o Impose a regional price cap that varies by time of day and year;
o Set requirements for FERC to use its retroactive refund authority;
o Improve FERC enforcement over price gouging practices;
o Affirm the role of states to protect their customers from unjust prices.
o Pressure the FERC to do its job to (1) bring about responsible seller 
behavior in wholesale electric markets through price controls and other 
market interventions as necessary, and (2) provide refunds to affected 
consumers.
----- Forwarded by Jeff Dasovich/NA/Enron on 11/22/2000 03:44 PM -----

	Susan J Mara
	11/22/2000 03:05 PM
		
		 To: "CHUDSON" <carol@iepa.com>
		 cc: "Andy Brown \(E-mail\)" <abb@eslawfirm.com>, chudson@iepa.com, "Curtis 
Kebler \(E-mail\)" <curtis_l_kebler@reliantenergy.com>, "Delaney Hunter 
\(E-mail\)" <dhunter@smithandkempton.com>, "Greg Blue \(E-mail\)" 
<gtbl@dynegy.com>, "Jack Pigott \(E-mail\)" <jackp@calpine.com>, "Jeff 
Dasovich \(E-mail\)" <jdasovic@enron.com>, "Joe Ronan \(E-mail\)" 
<joer@calpine.com>, "John Stout \(E-mail\)" <John_H_Stout@reliantenergy.com>, 
jparker@HMOT.com, "Katie Kaplan \(E-mail\)" <kaplan@iepa.com>, 
kelly@hnks.com, "Kelly Norton \(E-mail\)" <knorton@mcnallytemple.com>, "Lynn 
Lednicky \(E-mail\)" <lale@dynegy.com>, marie_moretti@msn.com, 
mrmonagan@aol.com, "Bob Weisenmiller \(E-mail\)" <rbw@mrwassoc.com>, "Bob 
Escalante \(E-mail\)" <rescalante@riobravo-gm.com>, "Rob Lamkin \(E-mail\)" 
<rllamkin@seiworldwide.com>, "Jan Smutny-Jones \(E-mail\)" <smutny@iepa.com>, 
"Steven Kelly \(E-mail\)" <steven@iepa.com>, "Susan J Mara \(E-mail\)" 
<Susan_J_Mara@enron.com>, "McNally Temple Assn. Inc. \(Business 
Fax\)"@mail.cwo.com
		 Subject: Re: 

Jeff Dasovich and Steve Kean are attending.  Someone can be on a call -- me 
if no one else -- if Jeff and Steve are travelling at the time. Hey, does the 
Governor have to fly coach?



	"CHUDSON" <carol@iepa.com>
	11/22/2000 12:47 PM
		 
		 To: "Katie Kaplan \(E-mail\)" <kaplan@iepa.com>, "Jeff Dasovich \(E-mail\)" 
<jdasovic@enron.com>, "Kelly Norton \(E-mail\)" <knorton@mcnallytemple.com>, 
"John Stout \(E-mail\)" <John_H_Stout@reliantenergy.com>, "Curtis Kebler 
\(E-mail\)" <curtis_l_kebler@reliantenergy.com>, "Rob Lamkin \(E-mail\)" 
<rllamkin@seiworldwide.com>, "Bob Weisenmiller \(E-mail\)" 
<rbw@mrwassoc.com>, "Susan J Mara \(E-mail\)" <Susan_J_Mara@enron.com>, "Andy 
Brown \(E-mail\)" <abb@eslawfirm.com>, "Bob Escalante \(E-mail\)" 
<rescalante@riobravo-gm.com>, "Greg Blue \(E-mail\)" <gtbl@dynegy.com>, "Jack 
Pigott \(E-mail\)" <jackp@calpine.com>, "Jan Smutny-Jones \(E-mail\)" 
<smutny@iepa.com>, "Joe Ronan \(E-mail\)" <joer@calpine.com>, "Lynn Lednicky 
\(E-mail\)" <lale@dynegy.com>, "McNally Temple Assn. Inc. \(Business 
Fax\)"@mail.cwo.com, "Steven Kelly \(E-mail\)" <steven@iepa.com>, "Susan J 
Mara \(E-mail\)" <Susan_J_Mara@enron.com>, <mrmonagan@aol.com>, 
<marie_moretti@msn.com>, "Delaney Hunter \(E-mail\)" 
<dhunter@smithandkempton.com>, <kelly@hnks.com>, <jparker@HMOT.com>, 
<chudson@iepa.com>
		 cc: 
		 Subject: 






Jan Smutny-Jones, Exec Dir
Independent Energy Producers Assn.
1112 I Street, Suite 380
Sacramento, CA 95814
PH: 916-448-9499
FX: 916-448-0182
iepa@iepa.com

 - Govs meeting Conf Call.doc