Cost-Reduction Measures

FYI! This is interesting - cost reduction measures by SCE (see last email
below from Steve Frank, Chairman, CEO, President of SCE)
---------------------- Forwarded by Nancy Hetrick/NA/Enron on 11/10/2000
09:58 AM ---------------------------
From: George Phillips@EES on 11/09/2000 04:57 PM
To: Nancy Hetrick/NA/Enron@Enron
cc: Rick Baltz/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Jubran
Whalan/HOU/EES@EES, Frank Wanderski/HOU/EES@EES

Subject: Cost-Reduction Measures

fyi - Thought you might find the letter below the note interesting.
---------------------- Forwarded by George Phillips/HOU/EES on 11/09/2000
04:56 PM ---------------------------

Larry.Colwell@sce.com on 11/09/2000 12:30:55 PM
To: DPB2@pge.com, ddc2@pge.com, lclay@sdge.com, kjczarnecki@calpx.com,
Merilyn_Ferrara@apses.com, vivek.gadh@us.arthur, emccann@sdge.com,
sem4@pge.com, gperez@caiso.com, JPlumley@caiso.com, gphillip@enron.com,
scr@cpuc.ca.gov, Susan_A_San_Martin@calpx.com, rschlanert@electric.com,
Marilyn_L_Uranga@calpx.com, LWilloughby@sdge.com
cc:
Subject: Cost-Reduction Measures

Hello everyone,

Until further notice, my participation on meetings has come to an immediate
halt. At a minimum, this includes DQI and stakeholder meetings. The
attached letter below was distributed to all employees today and gives an
explanation into the reasoning for this decision. Obviously, this decision
impacts other areas besides SCE's participation in meetings, but this
elevates the concern over SCE's financial position in the market. I am not
sure at this time if a formal press release will be sent out. If you have
any questions, please let me know.

Larry Colwell

----- Forwarded by Larry Colwell/SCE/EIX on 11/09/2000 10:27 AM -----

Stephen E.
Frank/SCE/EDISON To: Southern California Edison
X@Exchange Employees/SCE/EDISONX@Exchange
cc:
11/09/2000 10:25 Subject: Cost-Reduction
Measures
AM

Dear Fellow Employees:

These have been times of great uncertainty and, quite frankly, great
frustration for everyone involved in trying to encourage state authorities
to immediately address the mounting undercollection of excessive wholesale
electricity costs that we and the state's other investor-owned utilities
have incurred over the past six months.

These costs for SCE alone, which currently cannot be passed on to customers
due to the mandatory rate freeze, total more than $2 billion. As you can
see, we effectively have been forced to finance electricity purchases for
our customers, because the California wholesale electricity markets are not
workably competitive. Despite our ongoing efforts to move the California
Public Utilities Commission and other state authorities to act with
urgency, the clearest signal we are getting from them at this point is
further delay. With mounting debt, however, each day of delay costs us
more and further jeopardizes our ability to pay our bills, to continue
serving our customers in a reliable manner with superior customer service,
and to help sustain California's growing economy.

Toward this end, I am immediately implementing, as a first step, a series
of cost-reduction measures, including an immediate freeze on hiring,
general new construction and remodeling, and a suspension of all
nonessential equipment purchases and service contracts. Additionally, we
are suspending charitable and community contributions, eliminating all
discretionary travel, and further reducing administrative expenses
throughout the company.

In the event that we do not receive appropriate and swift action from the
CPUC, it will be necessary to implement much more substantial reductions,
which would affect our workforce and major capital, infrastructure and O&M
expenditures. Analysis and planning for this contingency are underway,
should such measures become necessary. In all this, however, I should
emphasize our intention to retain a skilled workforce at SCE and to provide
electric service without compromising the safety of our employees.

The irony of all this is the fact that our company is performing well and
meeting its goals?thanks to all of you. In a real sense, we and our
customers have become the victims of unintended consequences of a
California state market that is broken and dysfunctional. We continue to
believe that a near-term rate increase is absolutely necessary to ease our
cash hemorrhage. We do not yet know whether the CPUC will provide this
essential near-term relief.

I realize that these circumstances may create significant anxiety for
everyone, but I encourage you to remain focused on performing your jobs in
an excellent and safe manner. This means we need everyone's cooperation
and continued efforts in order to be successful. As we have done in past
weeks, we will keep you apprised of new developments relative to our
numerous filings regarding our energy procurement cost recovery effort and
the state and federal processes regarding market reform in general.

Stephen E. Frank
Chairman, President & CEO
Southern California Edison