Here are some thoughts for Enron to share with at the Analyst meeting.  
Please let me know if you have any additions, changes, or deletions.  What I 
tried to put down were the key facts and positions.  If I've missed anything 
let me know.  This is not a great story.

Jim

OUR PHYSICAL POSITION IN CALIFORNIA

EES has electricity customers within the territories of SCE, PG&E, and SDG&E 
(about 800 MW of usage) [NOTE - CHECK WITH EES].  EES has natural gas 
customers within the territories PG&E and SoCal Gas.

Enron does not have any generation in California (we own a small QF in Nevada 
but only have 50 MW excess).  

We supply power to the Utilities and to our retail load by buying excess in 
California or by transmitting power into the state.  Enron sells natural gas 
to the LDCs mainly under spot arrangements.

Enron continues to manage the risk by using traditional hedging tools and by 
using the full complement of resources of EES - demand reduction, load 
shaping, and efficiency improvements.

Transwestern has long-term capacity arrangements with PG&E.

OUR POLITICAL POSITION IN CALIFORNIA / MESSAGES

The current situation (shortages and potential bankruptcy) is not the result 
of competitive markets, rather it is the result of barriers to workable 
retail and wholesale markets designed into the California deregulation model 
(for instance, the overreliance of the Utilities on the spot market, the 
residual CTC calculation, incomplete retail tariff unbundling requiring 
direct access customers to pay more than their fair share for the Utilities' 
common costs). 

Enron does not want to see the California Utilities go bankrupt because those 
naysayers of competition will use this situation as an argument against 
competition.  Enron disagrees.  What it proves is that not finishing the job 
of creating real competition can result in problems.  

Enron believes that there are workable short-term and long-term solutions for 
California.

In the short-term, (1) California must provide credit enhancement or directly 
buy power for the Utilities' needs to ensure a stable supply of electricity, 
(2) California should incent customers to institute demand reductions, and 
(3) California should raise rates to cover reasonable costs so that the 
Utilities do not petition for bankruptcy.

In the long-term, (1) California needs to continue its activities to promote 
retail competition (and most importantly it must allow real price signals to 
be sent to large customers), (2) California should implement the changes that 
the FERC highlighted (end the reliance on the spot market, remove 
stakeholders on the Cal ISO Board, give the Utilties the ability to recover 
wholesale power costs), (3) California must remove unnecessary barriers to 
the development of additional generation capacity, and, most importantly, (4) 
California must establish reasonable structures so that the Utilities develop 
a balanced portfolio of supplies to better manage electricity market 
volatility.

California should not get into the business of owning or operating generation 
assets or transmission facilities.  

California should not stop moving forward with retail competitition which 
allows customers to manage price risk rather than some regulator.

KEY ENRON ISSUES IN CALIFORNIA

We do have outstanding deliveries into the California utilities and would be 
an unsecured creditor if bankruptcy occurs. We continue to sell to 
creditworthy counterparties in Western Power markets. [NOTE - THE AMOUNT OF 
RISK IS AN IR ISSUE THEY WANT TO MANAGE].

The PX Credit (and associated negative CTC) continues to be an issue.  Enron 
believes that the rate freeze has not yet ended legally and PG&E's and SCE's 
tariff requires the Utilities to pay funds to the customer's agent.  We filed 
a Complaint Friday January 19 at the CPUC.  We are confident that these funds 
will be recovered.  [NOTE - I DON'T THINK WE WANT TO HIGHLIGHT THIS - AGAIN 
AN IR ISSUE BECAUSE OF THE RECEIVABLE]