Gay, here's the story and some numbers for the Q3 comparison.  Please remember
the context of our phone conversion this morning when looking at this. 
Hopefully this helps Investor Relations put the story together for the
Earnings Release.

Power Cost Adjustment 
We now expect to have an amount collectable from customers to record all Q3 of
$86m.  Since we we're basically at the deadband level at the end of Q2, we end
up eating our way through the deadband and up into the 90% collection band all
in Q3.  On a stand alone basis, we will incur  about $54m of net variable
power costs Q3 that we won't have any revenues for (but remember to keep this
in context for the entire 9-month period).  The following shows how this is
calculated:

Projected Net Variable Power Costs = $316m
Baseline for PCA = $176m
Difference Subject to PCA Collection = $140

Deadband  = $35m  (no collection)
50/50 band = $21m (collect $10.5m, no collection = $10.5)
90/10 band = $84m (collect $75.5m, no collection = $8.5)

The bands above = $140m ($35+21+84)
Collections = $86m ($10.5+75.5)
No Collection (PGE eats) = $54m ($35+10.5+8.5)

Again, without the PCA mechanism and no other price increase between 1/1/01
and 9/30/01, PGE would be $90m worse off.  As we discussed, before pulling our
request for a rate increase to be effective 1/1/01 (which was replaced with
the PCA mechanism), the latest amount being offered up by our PUC would have
been around a $90m increase for the 9-month period (although the evidence was
quickly moving towards no need for an increase, so we probably wouldn't have
got the rate increase, and without a PCA, would have been worse off today).  

Quarter to Quarter Comparison - Margins
As we discussed, things were looking really good for us through Q2 2001, but
price caps and other factors in late Q2/early Q3 really dropped the price we
could sell our excess power for, and accordingly has dropped our margins.  In
addition, a slowing economy and customer energy efficiency measures have
resulted in significant reductions in our retail revenues compared to last
year.  

Another point on the this year/last year quarter to quarter comparisons is
that we went into Q3 2000 with length purchased at fairly low/reasonable costs
over the prior year or so.  In Q3 2000, wholesale sales prices increased
dramatically (California market) so we made tremendous margins (above normal).
 Going into Q3 2001, much of the power we purchased was at higher prices than
the previous year because of the higher wholesale power market operating over
the past year.  When price caps and other events dropped the bottom out of the
wholesale power prices, our margins on our power lenght dropped dramatically. 
The PCA only picks up a power of this increase in net variable power costs, as
outlined above.  Also remember that we have a regulatory obligation to serve
our customers, so we have to go into a month with length in order to ensure we
can handle any potential load spikes or unplanned plant outages.  Any excess
power is sold in the wholesale market in the day-ahead or real-time markets.  

Big story, price caps and lower retail revenues have really hurt us year to
year, but our new rate case effective 10/1/01 should get us back on track. 

Gross Margin Comparisons
Based on our latest forecast, here's a breakdown of our gross margins on a
year to year comparison for Q3.  This gives you a high level look at the
impact the above events have had on our margins year to year ($94m decrease in
gross margin).

                                            Q3 2000                 Q3 2001
Retail Revenues                    $257m                   $250m
Wholesale Revenues               466m                    571m
Other Revenues                            5m                       5m
Variable Power Costs                523m                    715m
Gross Margin                           $205m                  $111m

Let me know if you have questions



>>> "Mayeux, Gay" <Gay_Mayeux@ENRON.net> 09/19/01 05:43AM >>>

I will try again.  Mine shows an attachment.  
Look at the very bottom of the email.  Thanks!
_________________________ 
Gay Mayeux 
Vice President, Investor Relations 
Enron Corp. 
1400 Smith Street, EB 4931a 
Houston, Texas 77002 
Phone:  713-853-9905 
Cell:      713-416-8821 
Fax:      713-646-3002 
email:    gay.mayeux@enron.com 
-----Original Message-----
From: Kirk Stevens [mailto:Kirk_Stevens@pgn.com]
Sent: Tuesday, September 18, 2001 6:45 PM
To: Mayeux, Gay
Subject: Re: PGE Power Costs


Gay, there wasn't an attachment

>>> "Mayeux, Gay" <Gay_Mayeux@ENRON.net> 09/18/01 03:24PM >>>
Attached is my attempt to summarize the PGE power cost issue.  Please
call me to discuss.  I have no pride of authorship - just want to make
sure it is simple as possible while still being correct.  I will be here
until about 6:30 my time.  Thanks!

_________________________
Gay Mayeux
Vice President, Investor Relations
Enron Corp.
1400 Smith Street, EB 4931a
Houston, Texas 77002

Phone:  713-853-9905
Cell:      713-416-8821
Fax:      713-646-3002
email:    gay.mayeux@enron.com



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