The attached preliminary comments were finalized and filed with the 
Commission this afternoon, in order to provide FERC staffers a concise, 
effective statement of our position while they drafted the Judge's 
recommendation.  I was able to schedule a meeting with Judge Wagner, at which 
Dan Watkiss and I stepped the Judge through the comments and hit the 
following high points: 

1.  The methodology of the June 19 order does not work and is totally 
inappropriate for marketers.  If price mitigation is inevitable, the Judge 
should formulate or make allowances for a workable methodology.

2.  The Judge should recommend that the end result of any Commission order 
must be a just and reasonable finding for all periods, both prior to and 
after October 2.

3.  All buyers, including Enron, should be entitled to refunds; not just the 
State of California and its IOU's.  Enron is a net purchaser in these markets.

4.  Only the state administered spot markets should be subject to the 
methodology, not bilateral contracts, OOM sales or sales to the DWR. 

The details of these points appear in the attached document.  The Judge was 
receptive to most points.  He understood the problems that the June 19 
methodology presents for marketers and was agreeable to the notion that this 
should be addressed, perhaps in the context of the hearings that will form 
part of his recommendation.  He agreed that the actual buyers should receive 
refunds, and it was his understanding that only spot transactions should be 
subject to the refund methodology.  Although he agreed that the refund 
methodology, once implemented, should yield just and reasonable rates, he 
felt that this was outside the scope of his recommendation and that the 
matter was up to the Commission.  The Judge spoke generally and no promises 
were made as to the content of his recommendations, but hopefully this 
insight will shed some light as to the outcome.  I urged the Judge to 
recommend placing conditions to refunds, as the Commission did in its June 19 
order with its RTO filing requirement.  The judge was noncommittal on this, 
although he did indicate that he felt refunds should be subject to offset.

Next steps include filing our detailed comments by Thursday.  The Judge told 
us he would certify his recommendation to the Commission on Friday, and that 
the comments would accompany the recommendation.  Thereafter, it is likely 
that the Commission would defer to the Judge's recommendation to hold a fast 
track evidentiary hearing of 60 days duration, to determine "unresolved 
issues of material fact".  The scope of the hearing has not been determined, 
but  will probably include cost issues and might serve as a vehicle for 
marketers to recommend an alternative methodology.