Re: California Strategy RE: PG&E

----- Forwarded by Jeff Dasovich/NA/Enron on 09/28/2000 06:14 PM -----

Mary Hain@ECT
09/28/2000 05:38 PM

To: Susan J Mara/SFO/EES@EES, Mona Petrochko, jdasovic@ees.enron.com
cc: Christopher F Calger/PDX/ECT@ECT
Subject: Re: California Strategy RE: PG&E

FYI
---------------------- Forwarded by Mary Hain/HOU/ECT on 09/28/2000 03:45 PM
---------------------------

Christopher F Calger
09/25/2000 08:00 AM
To: James D Steffes/HOU/EES@EES
cc: Tim Belden/HOU/ECT@ECT, Mary Hain/HOU/ECT@ECT, Chris H
Foster/HOU/ECT@ECT, David Parquet/SF/ECT@ECT, Michael McDonald/SF/ECT@ECT,
Laird Dyer/SF/ECT@ECT
Subject: Re: California Strategy RE: PG&E

Thanks Jim. ENA is very interested in this topic. I was talking with Mona
last week about my view that a strategy with PG&E should be supportive, not
adversarial. ENA is extremely interested in a gas management position with
PG&E and they have made it clear to us that our public positions against them
are a significant commercial issue. I will spend some time with Portland and
SF to get an ENA consensus on these points.

Chris

James D Steffes@EES
09/21/2000 09:28 PM
To: Tim Belden/HOU/ECT@ECT, Mary Hain/HOU/ECT@ECT, Chris H
Foster/HOU/ECT@ECT, Christopher F Calger/PDX/ECT@ECT
cc:
Subject: California Strategy RE: PG&E

FYI.

If you are not aware, PG&E is pushing for immediate end of their retail rate
cap (so they can collect wholesale energy costs).

EES is considering its positions in that matter to prepare for CPUC and
legislative proceedings.

I want to make sure that you are aware of these internal discussions. Key
from EPMI include (1) endorse Cal ISO report conclusions, (2) competititve
default supplier, (3) increasing rate freeze for all customers, and (4)
transfer of PG&E Hydro to affiliate at $2.8B (to offset current
undercollection).

Please let me know if these positions make sense to you. While I think that
our general position is retail volatility, given the current situation in
SDG&E that is simply impossible politically.

Please feel free to call.

Jim

---------------------- Forwarded by James D Steffes/HOU/EES on 09/21/2000
10:39 PM ---------------------------
From: Harry Kingerski@ENRON on 09/21/2000 03:54 PM
To: James D Steffes/HOU/EES@EES, Paul Kaufman/PDX/ECT@ECT, Jeff
Dasovich/SFO/EES@EES, Mona L Petrochko/SFO/EES@EES, Susan J Mara/SFO/EES@EES
cc: Richard Shapiro/HOU/EES@EES, Roger Yang/SFO/EES@EES
Subject:

I met with Dennis Benevides, Jim Wood and Scott Gahn about the PG&E strategy
we discussed and the EES perspective. Suggestions:

Endorse the recent CAL ISO report on causes of the problem (no utility
forward buying, no demand responsiveness, etc) and say, with a few tweaks,
their proposals were on target.

Get CTC roll-off no earlier than Spring '01. Retroactive roll-off would be
devastating.

Use PG&E $15 billion exposure as leverage to get competitive default supplier
in place (get them out of merchant supply).

Impose a stair-step shape on the rate increase, to prompt customer migration.

Keep PG&E somewhat at risk for wholesale cost recovery, delay recovery of
under-recoveries until out years.

Keep rate freeze (which is preferable to rate cap) to as short a period as
possible, post '01.

Here is a rework of Jim's bullet points to incorporate these thoughts:
Keep in mind the numbers are all just placeholders and are not meant to be
definitive. Once we start to hone in on the concept, we can develop the
right numbers.

From a retail perspective, this blends protection of the book with
advancement of new market opportunity. I may still get more feedback from
the EES guys, but wanted to give you what I got so far.