PG&E Gives Notice to ISO of "Uncontrollable Force" and Non-Payment

----- Forwarded by Susan J Mara/NA/Enron on 02/01/2001 03:22 PM -----

"Woertz, Byron" <BWoertz@caiso.com<
02/01/2001 02:18 PM

To: ISO Market Participants
<IMCEAEX-_O=CAISO_OU=CORPORATE_CN=DISTRIBUTION+20LISTS_CN=ISO+20MARKET+20PARTI
CIPANTS@caiso.com<
cc:
Subject: CAISO Notice - Letter from PG&E Regarding Payment for November, 2
000 Invoice

ISO Market Participants:
On January 31, 2001, the CEO of the California ISO received
by fax a letter from Joseph C. Henri, Director of Utility Electric Portfolio
Management at Pacific Gas and Electric Co. (PG&E). Mr. Henri stated that
PG&E was providing notice pursuant to Sections 15.1 and 15.2 of the ISO
Tariff that "Uncontrollable Forces prevent PG&E from performing all of its
obligations under the ISO Tariff." Mr. Henri's letter identified
"government regulations and market conditions" as "forces beyond PG&E's
reasonable control." In addition, Mr. Henri stated that the temporary
electric rate increase ordered by the California Public Utilities Commission
on January 4, 2001 was "an amount far below that necessary to enable PG&E to
generate sufficient cash to pay its ongoing procurement bills."
Mr. Henri continued by stating that "PG&E...lacks the funds
to pay in full its bill from the Independent System Operator for November
power purchases, due on February 1, 2001." Further, Mr. Henri stated that
"because PG&E's inability to make full payment is due to Uncontrollable
Forces, the ISO Tariff precludes the Independent Service (sic.) Operator
from imposing any sanctions against PG&E."
Mr. Henri concluded by stating that PG&E's efforts to secure
relief from these circumstances continue and that PG&E will inform the ISO
as soon as it is able to resume making full payment for its wholesale power
purchases.
At present, the California ISO neither accepts nor rejects
the claims made in Mr. Henri's letter. The purpose of this market notice is
to fully inform Market Participants who may have claims directly against
PG&E based on PG&E's failure to pay in full ISO invoices.

Byron Woertz
Director, Client Relations