Greg

Here is a summary of some of the stuff that Tim and Chris put together for Edison.

CTC's June 2000 - Jan 2001 93 MM
Amount already paid by Edison (35) MM
Net Owed June 2000 - Jan 2001 58 MM

CTC's Feb 2001 - Sept 2001 52 MM (Our Calculations)

Total On our books 110 MM

T&D Payments withheld (7) MM

Net Amount owed 103

Total Amount Approved by CPUC for all ESP's is $243. Therefore it may be that they included our post January amounts.

Greg I don't know if you were aware but there have been discussions between our RAC/Bankruptcy and Government affairs group and Edidson.

A few weeks ago, we (government affairs) approached John Fielder of Edison to see if there was any chance that Edison might be willing to reach a deal on our Negative CTC/PX credit claim.
After discussions with RAC, we offered to take 90 cents on the dollar for amounts owed through March 1. (There's general agreement with Edison on what the number is up to January 17, which would only leave 1.17--3.1 in dispute. But recall there's still the FERC refund issue which complicates the issue.)
We asked for 10% down immediately and a binding agreement that Edison would pay us by a date certain sometime in the next quarter.
In exchange, we said we'd drop our law suits at the PUC. In one suit, we're asking the PUC to have Edison pay us. In the other, we've stopped paying Edison for transportation costs until the PUC gets Edison to pay us. We're depositing what we owe Edison in an escrow account pending resolution.
We also agreed to work with Edison to get the PUC to end the whole residual CTC/PX credit framework retroactive to March 1, 2001. (That would reduce Edison's exposure to negative CTC and our exposure to positive CTC.)
For his part, Fielder was looking (in addition) for 1) an agreement on our part to forebear, and 2) an agreement that everyone, including DA customers, should pay what they rightly owe for a) Edison's undercollection, b) the bonds, and c) DWR's stranded contract costs. Some of these points would obviously be an issue.
We never resumed the talks in earnest because soon after our talk, Edison struck its bailout deal with the PUC.

Greg

I suggest Lay calls Edison and then Calger takes over all negotiations from that point.

Below are some other observations from Tim.

Our reading of the CPUC-Edison settlement looks like there is no shareholder benefit if Edison reduces its payments to the CPUC. Furthermore, the settlement works through the math on how Edison should be able to meet all of its obligations by 2004, there is no detail on who gets paid first and the timing of when the money comes into Edison and when it goes out to creditors. There is no language in the Settlement that describes how they will go about figuring this out. It would be helpful to get Bryson's opinion on this matter.

Our current origination activities with Edison have been focused on QF's. There are a bunch of QF's that are out of the money on a marginal cost basis who should not be running. Calger is trying to figure out how to shut those down and provide replacement power at a lower cost so that everyone wins. He is also looking at straight gas sales to hedge the gas risk embedded in the QF contracts.

Notes:

CTC's June 2000 - Jan 2001
Edison will agree in principle that they owe us CTC's up through the demise of the PX in January. I believe that there position will be that CTC's went to zero (PX Credit equals embedded cost in rates) after the PX closed for business at the end of January.

CTC's Feb 2001 - Sep 2001
Edison will likely dispute these amounts. They have advocated for a change in the calculation of the CTC setting it to zero once the PX closed for business. It is interesting to note that Edison and PG&E have implemented different CTC calculation methodologies. Edison's methodology essentially ends the rate freeze, and therefore the PX credits and the calculation of the CTC's. PG&E's methodology uses PG&E's embedded cost of generation (including QF's) and a proxy price for CDWR purchases. It results in a PX Credit that is very close to the embedded generation number in rates. Neither of these methodologies has been approved by the CPUC. We don't know when, if ever, the CPUC will provide clarity on this important matter.

Amount Paid by Edison
Checks received from Edison, customer by customer, for CTC's.

T&D Payments Witheld
The CPUC ordered that the CTC should not be a cash payment, but rather a credit that we could use to offset future amounts owed to Edison. It is not clear how this should work. Edison gave us credit for a while and then pulled the credits off the bill. Beginning in September we have remitted T&D payments to the CPUC rather than Edison and disputed the necessity to pay cash rather than offset our CTC receivable. CPUC has not opined on this matter.