IOwa bill overview

Steve--you had asked for an overview of what is in the Iowa bill. Below is a
partial listing of what we like and don't like in it.

Positives:

choice as of October 1, 2002 for all customers

strong codes of conduct (with penalties)

metering and billing competitive

large customers have SOS for one year only

uniform unbundling (muni and coops all post to a common web site)

"shopping credit" increases each year that transition costs are collected

Negatives:

divestiture is not required

stranded cost is thru lost revenue approach

SOS is in place for at least 6 years for residential/commercial (although
IUB may bid out wholesale at some point)

certification of suppliers is convoluted (we won't have trouble--it's just
very prescriptive)

Description of Enviromental section:

The current bill provides for an RPS that ramps up to 8% in 2011.
Additinally, monies are collected thru a non bypassable wires charge totaling
approx. $50 million per year. These monies are deposited with the Dept of
Natural Resources, who is charged with designing programs that
encourage/subsidize the development of renewable resources in Iowa. If
developers use this fund for their project, they must then offer renewable
power to competitive energy suppliers for their 8% requirment at a "market
rate". A credit trading program is allowed. Competitive suppliers can meet
their RPS requirment with sources from outside the state. If the DNR is not
able to design subsidy programs that work, the IUB has the right to waive the
RPS requirment for competitive electric suppliers. As I described to you in
our phone conversations, this agreement is as far as the customers would go
in the renewable negotiations and this section has been agreed to by the
governor.

The DNR and other enviromental groups continue to push for an amendment that
de couples the RPS from the DNR performance (makes the RPS hard, with no
right to waive by IUB); that requires all renewables that are used by the
competitors to Iowa based and that they have to be built after 2000. They
also want significant financial penalties beyond the penalties already in the
bill for certification infractions. All of these proposals are deal breakers
for the customers--who believe that competitors will not come to Iowa if
there are too many hoops to jump thru (Illinois next door has no renewable
requriments).

Conclusion

Since we have as one of our top tens goals for the government affairs group
that we get 2 more states to pass legislation in 2000, I see this bill as a
positive for us in trying to reach that goal. As described in my previous
updates, however, the bill is now ALL about politics, and passage rests with
leadership.