FW: Methodology for Allocating Missed SCE and PGE Payments

Tracy-- can you look at this and give me a call-35587. I dont understand what it means to us.

-----Original Message-----
From: "Howard J. Weg" <hweg@pgwlaw.com<@ENRON [mailto:IMCEANOTES-+22Howard+20J+2E+20Weg+22+20+3Chweg+40pgwlaw+2Ecom+3E+40ENRON@ENRON.com]
Sent: Thursday, June 14, 2001 10:22 PM
To: 'Alan Yudkowsky for Sempra'; 'Bob Nelson for Enron'; 'Brian Holman for Mirant'; 'Carl Eklund for Enron'; 'Dan Whitley for Enron'; 'David Burns for Reliant'; 'David Facey for Powerex'; 'David Gill for DWP'; 'Douglas Anderson for Salton Sea Power'; 'Howard Weg for Powerex'; 'James Crossen for APX'; 'James Huemoeller for Enron'; 'John Klauberg for Enron'; 'Kjehl Johansen for DWP'; 'Michael Lubic for Reliant'; 'Pat Mar for Avista'; 'Peter Gurfein for Salton Sea Power'; 'Rich Stevens for Avista'; 'Richard Beitler for Sempra'; 'Richard Diamond for DWP'; Sanders, Richard B.; 'Robert Berry for APX'; 'Zack Starbird for Mirant'
Subject: Methodology for Allocating Missed SCE and PGE Payments

As promised, here is my outline of a proposed methodology for allocating the
losses arising from the payments not made to CalPX by SCE and PGE:

1) All participants should be returned to the position they were in before
CalPX issued invoices based on the 90 day charge back provisions in the
tariff. This will implement the rescission of the 90 day charge back
methodology ordered by FERC.

2) The losses arising from payments not made by a particular buyer for power
purchased during a particular period will be shared pro rata among the
sellers that sold electricity during that period based on the amounts the
sellers are owed for that particular period.

3) The CalPX will not apply any charge back or default allocation to
payments and losses applicable to the real time market for which the CalPX
acts as Scheduling Coordinator. Instead, CalPX will collect the payments,
if any, and pass them on to the ISO, subject to whatever administrative
charges CalPX is authorized to deduct by the CalPX or ISO tariffs. Only the
ISO tariff will apply to allocate the losses from payments not made for
power sold and purchased on the real time market.

4) Any payments presently held or hereafter collected and expressly
designated for a particular period and buyer will be applied to the period
and buyer for which such payments are designated. Any payments presently
held or hereafter collected that are not designated for a particular period
will be applied to the oldest missed payments by the buyer that subsequently
made the payment or on account of which the payment was subsequently
collected.

As I have maintained, this methodolgy may not be perfect for everyone, but,
assuming that it works, it has the appeal of being both simple and
principled. The CalPX has indicated that it will provide us with feedback
on our approach, but will not formally endorse any particular methodology
because of its concern that it must remain neutral and not appear to support
any group of participants against any other group of participants.

As I have also maintained, until a simple and principled methodology is
adopted, it will be difficult to make any progress with the return of the
letters of credit and the distribution of the funds in the custodial and
escrow accounts.

I believe we should agree upon a workable methodology and then file a motion
with the bankruptcy court on notice to all participants to have the CalPX
authorized and directed to adopt and implement the methodology. The
participants can then take the order to Judge Moreno to release the letters
of credit and escrowed funds and to FERC to have it formally amend the
tariffs to incorporate the methodology.

Please review the methodology outlined above with your clients so that we
can discuss it in detail during our next conference call.

Thanks.

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