----- Forwarded by Steven J Kean/NA/Enron on 02/28/2001 02:09 PM -----

	Jeff Dasovich
	Sent by: Jeff Dasovich
	02/26/2001 06:50 PM
		 
		 To: skean@enron.com, Richard Shapiro/NA/Enron@Enron, James D 
Steffes/NA/Enron@Enron, Sandra McCubbin/NA/Enron@Enron, mpalmer@enron.com, 
Karen Denne/Corp/Enron@ENRON, John 
Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Harry Kingerski/NA/Enron@Enron, 
Susan J Mara/NA/Enron@ENRON, Paul Kaufman/PDX/ECT@ECT, Leslie 
Lawner/NA/Enron@Enron, Alan Comnes/PDX/ECT@ECT
		 cc: 
		 Subject: Solve IOU Undercollection with a Mere 10% Average Rate Increase?

Greetings:

Please review the attached.  It's a summary I've put together of a very 
lengthy analysis MRW did for us over the weekend.  I've also attached the 
considerably lengthier MRW memo for those who'd like to see it.  The tables 
included in the summary are pulled directly from the MRW memo.  The analysis 
only addresses the utilities undercollection (i.e., solvency) and doesn't 
address any additional increases that might result from DWR's buying 
activities.

The Bottom Line
 By raising average rates 10% over a 10-year period, California could 1) 
return the utilities to solvency, and 2) help close the  supply-demand gap by 
providing customers with better price signals.
 California could achieve these goals under this new rate structure and at 
the same time exclude one-third of residential  customers from any increases. 
If California chose not to exclude any customers from the new rate structure, 
California  would only need to raise average rates by about 8.8%.
 This level of increase is in line with increases enacted in other states 
(e.g., Washington: 28-34%; Montana: 4.5-32%; Idaho:  6.0-24%; Nevada: 
7-12.5%; New Mexico 12%).

We'll need to look at it critically and try to shoot holes in it before going 
public with the numbers as part of our broader effort, but it offers a 
reasonable benchmark against which to judge alternatives (like spending the 
kids lunch money on crumbling, broken down transmission systems).

Please provide feedback as soon as possible, and perhaps, Paul we conclude 
the MRW work on the agenda for discussion on tomorrow's daily conference call.

Best,
Jeff

 - Undercollection assessment final.doc