CPUC News -- From Press Conference as we Speak

Lynch and Wood Running the meeting

Lynch started out castigating FERC for the "failure to act", sellers for high
prices forcing CA into this action. Has some charts in the press package.
Talked about how wonderful the Govs proposals have been. Said net short is
34%. Sellers "have us over a barrell" for those sales. Attorney Gen
continues investigation of the sellers. These are all for going forward costs
-- this doesn't address the "$ for the hot dog, which is being taken care of
in Sacramento." She said these proposals ensure reliability and allow
Treasurer to issue bonds. Continues to castigate FERC throughout the call.
Wants new appointments to FERC from the states -- "our cries have fallen on
deaf ears"

Lynch announced the following votes for tomorrow:

1. Wood's proposal -- modified -- Order the IOUs to pay the QFs beginning
4/1 on a going forward basis only. Modified existing formula in Section 390
(Legislative change to this section did not pass yet). Shifts the gas index
from Topoc (where Wood says the prices are being mnipulated) to Malin, where
prices have been more stable.

2. Sets the CA Procurement Adjustment -- Orders the IOUs to pay the DWR for
purchases. At one point she said that the order would be for all power for
purchased by the state beginning Jan 19; at another point she said that the
payments are for going forward costs. "It's time to pay the power bills for
California." CPA calculated based on the "residual" method, rather than the
proportional method. Payments to DWR made on the proportional method,
however.

3. Lynch alternate setting a 3 cents/kWh increase in accordance with AB 1X.
(The ALJ decision said no rate increase.) Makes the 1 cent temp charge
permanent (didn't say if its additive with the 3 cents) Believe this covers
ALL needs on a going forward basis. According to ABX 1, small customers
with 130% over baseline get no increase, small customers with 200% increase,
get a 9 % increase -- the rest get socked, I guess. Adopted TURN's
accounting proposal. Will look at rate design in a future proceeding. Takes
IOUs 30-45 days to charge the rates; will conduct a rate design proceeding
during that time period (see # 5).

4. Orders an investigation into the Utility holding company structure to see
if it is best for the public utilities.

A new proceeding was also identified.

5. Lynch is issuing an Assigned Comissioner ruling proposing a new rate
structure. (I presume to have rates that increase greatly with more use)
Need information from DWR to calculate rates and DWR has not yet provided
it. Described the need to have a record on this. As mentioned in #3 above --
would expect this to be comepled with a decision in 30- 45 days.

In one of the above orders, Lynch said that she orders the utililities to go
after sellers using all legal means for the unjust and unreasonable prices.

I'm still listening.

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854