Re: Reactive Statement to Davis' Plan

FYI. Today Craig Barrett, CEO of Intel, publicly opposed the "state
takeover" plan released by California's Treasurer last Friday, saying, "I'm
not a great fan of government getting involved in the private sector,
especially delivering a key commodity to the private sector."
(SF Chronicle, 01.09.01)

Might be a good opportunity to try in earnest to enlist Silicon Valley in our
efforts to get California moving in the right direction, despite itself.

Barrett said the answer is easing siting rules in order to get more power on
line sooner and blamed officials who've opposed power plants for seriously
exacerbating the problems in California.

Because of CA' power woes, Barrett said that he'd build new facilities
anywhere but in California.

Jeff

Karen Denne
01/09/2001 03:02 PM

To: Richard Shapiro/NA/Enron@Enron, Paul Kaufman/PDX/ECT@ECT, James D
Steffes/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Linda
Robertson/NA/Enron@ENRON, Susan J Mara/NA/Enron@ENRON, Sandra
McCubbin/NA/Enron@Enron, Mark Palmer/Corp/Enron@ENRON
cc:
Subject: Reactive Statement to Davis' Plan

The following is a draft reactive statement to Gov. Davis' State of the State
address last night. If you have any comments or changes, please let me know
so I can route a final version. Thanks! kd

We're disappointed with Gov. Davis' plan to address the energy crisis in
California. While the governor has shown some recognition of the problem,
which is simply an issue of supply and demand, we disagree with his proposed
solutions. There are four problems in the California market: excess reliance
on spot markets, insufficient demand side response, insufficient supplies,
and financially unstable institutions. The solutions, simply put, should be
to decrease demand, increase supply, reduce exposure to spot prices and
provide financial support to the utilities. Gov. Davis' eight points do not
address the fundamental supply and demand issue. Furthermore, the governor's
rhetoric detracts from implementing real solutions.

If pressed on specifics:
Rather than mandating sales of power in-state, California would be better
served by providing the utilities with strong incentives to enter into
long-term contracts and by requiring them to buy some portion of their
forward requirements from new in-state generation.
We do not understand how Gov. Davis has the constitutionality to mandate the
flow of electricity into California, particularly in states that export to
California.
The governor failed to address the credit issue of the state's two utilities
(possible solution:near-term credit guarantees).