The inequities that I am referring to are:

SDG&E is charging a CTC charge to recover $115 million in CTCs for 2001 and 
$115 million for 2002; wheras, their expectation is that there will be no 
stranded costs in those years for SONGS and QF/PPs.  SDG&E plans to use these 
overcollections to offset the undercollections from their cap for the subset 
of small customers.
SDG&E has filed at FERC to apply RMR overcollections recovered from all 
customers to the undercollections from their cap for the subset of small 
customers.
SDG&E is applying the stranded benefits from SONGS and QF/PPs for which all 
customers have paid for the stranded costs in the past to the 
undercollections from their cap for the subset of small customers.

This is not necessarily a DA versus SO customers, since small DA and SO 
customers are treated the same.  It is more of a subsidy issue between large 
and small customers.  However, since most DA customers are large customers, 
it becomes a DA and SO issue.

I don't believe SDG&E is hiding this fact, because they filed an application 
at the CPUC on October 24, 2000, illuminating this issue.

We also need to keep our eyes open to spot any other transfer of 
overcollections that should rightfully be used to reduce rates for all 
customers.  What is motivating SDG&E is their perceived shareholder risks 
with respect to the undercollections caused by the cap.  They want to reduce 
their exposure.

We need to be sensitive to our TURN friends, but we want to illuminate the 
shortcomings of this type of transition mechanism to prevent legislators and 
regulators from switching to this mechanism in the shortrun.

Roger





Mona L Petrochko@ENRON
11/01/2000 03:29 PM
To: Roger Yang/SFO/EES@EES
cc: Jeff Dasovich/NA/Enron@Enron, Susan J Mara/NA/Enron@Enron, Dennis 
Benevides/HOU/EES@EES, Scott Stoness/HOU/EES@EES 
Subject: Re: California Regulatory Strategy  

The inequities that you are referring to in #4 is that the cap be applied 
both to bundled service and d/a customers, right?



Roger Yang@EES
11/01/2000 04:44 PM
To: Mona L Petrochko/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Susan J 
Mara/NA/Enron@Enron, Dennis Benevides/HOU/EES@EES
cc: Dennis Benevides/HOU/EES@EES, Scott Stoness/HOU/EES@EES 

Subject: California Regulatory Strategy

The purpose of this e-mail is to discuss the regulatory strategy in 
California.  As we have discussed, I believe the regulatory strategy can be 
summarized as follows:

Support the TURN proposal in order to maintain leverage against PG&E and 
SCE.  We will have to do this strategically to avoid negative consequences.
Provide comments on mitigation measures at the CPUC's disposal to mitigate 
PG&E's and SCE's undercollections on December 31, 2001 in order to make the 
CPUC comfortable with their decisions.
Work with PG&E and SCE on developing a post-freeze solution at the 
legislature to recover undercollections over a 5 year period in order to 
facilitate an acceptable solution.
Expose the inequities of the rate caps implemented in SDG&E's service 
territory for small customers in order to avoid a similar transition 
mechanism in PG&E's and SCE's service territories that might facilitate an 
end to the rate freeze for all customers prior to December 31, 2001.
Watch and prevent adverse changes to how the PX credit is calculated.


Roger