Message-ID: <23795845.1075850999215.JavaMail.evans@thyme> Date: Fri, 12 Jan 2001 01:12:00 -0800 (PST) From: scott.stoness@enron.com To: james.steffes@enron.com Subject: Re: Financial Analysis of PG&E and Proposed Terms for Settlement Cc: steven.kean@enron.com, richard.shapiro@enron.com, mark.palmer@enron.com, michael.tribolet@enron.com, harry.kingerski@enron.com, jeff.dasovich@enron.com, susan.mara@enron.com, joe.hartsoe@enron.com, sarah.novosel@enron.com, linda.robertson@enron.com, alan.comnes@enron.com, mary.hain@enron.com, paul.kaufman@enron.com, sandra.mccubbin@enron.com, roger.yang@enron.com, robert.badeer@enron.com, tim.belden@enron.com, stephen.swain@enron.com, travis.mccullough@enron.com, andre.cangucu@enron.com, shelia.benke@enron.com, vicki.sharp@enron.com, wanda.curry@enron.com, don.black@enron.com, gordon.savage@enron.com, donna.fulton@enron.com, william.bradford@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable Bcc: steven.kean@enron.com, richard.shapiro@enron.com, mark.palmer@enron.com, michael.tribolet@enron.com, harry.kingerski@enron.com, jeff.dasovich@enron.com, susan.mara@enron.com, joe.hartsoe@enron.com, sarah.novosel@enron.com, linda.robertson@enron.com, alan.comnes@enron.com, mary.hain@enron.com, paul.kaufman@enron.com, sandra.mccubbin@enron.com, roger.yang@enron.com, robert.badeer@enron.com, tim.belden@enron.com, stephen.swain@enron.com, travis.mccullough@enron.com, andre.cangucu@enron.com, shelia.benke@enron.com, vicki.sharp@enron.com, wanda.curry@enron.com, don.black@enron.com, gordon.savage@enron.com, donna.fulton@enron.com, william.bradford@enron.com X-From: Scott Stoness X-To: James D Steffes X-cc: Steven J Kean, Richard Shapiro, Mark Palmer, Michael Tribolet, Harry Kingerski, Jeff Dasovich, Susan J Mara, Joe Hartsoe, Sarah Novosel, Linda Robertson, Alan Comnes, Mary Hain, Paul Kaufman, Sandra McCubbin, Roger Yang, Robert Badeer, Tim Belden, Stephen Swain, Travis McCullough, Andre Cangucu, Shelia Benke, Vicki Sharp, Wanda Curry, Don Black, Gordon Savage, Donna Fulton, William S Bradford X-bcc: X-Folder: \Steven_Kean_Oct2001_2\Notes Folders\Attachments X-Origin: KEAN-S X-FileName: skean.nsf Jim. I like your suggestions and suggest the following enhancements: We should integrate this solution into the CPUC process. ie Keep rate freez= e=20 in effect until the Mar 02. Make state agency take over as ESP to all=20 bundled customers at 110% of frozen rate. This solution keeps the current= =20 Rate Freeze in place and keeps us in the game to not lose our negative ctc.= =20 It also corresponds to your minimal changes goal. It also puts government= =20 agency in the same place as us in having exposure to negative ctc as us. I= t=20 also accomodates the problem of RFP's taking longer than expected. It also= =20 solves the liquidity problem immediately and avoids the need for=20 forbearance. And furthermore it keeps the utility exposed to bankruptcy=20 which minimizes their negotiating power. I don't understand how this proposal addreses what happens with the existin= g=20 assets of PG&E. The worry I have is that PG&E gets to keep 50% of the=20 benefits of nuclear sales and 10% of the benefits of hydro sales, post rate= =20 freeze. If we damage 1890, the utilities are now in the drivers seat. re "ESPs should be able to buy from UDCs at the current weighted average=20 generation rate from 1/1/01 =01) 12/31/02 to serve any competitive load in= =20 California" This suggest a replacement to AB 1890 which suggests significa= nt=20 changes. Would it not be better to say "After the rate freeze, the=20 government entity would take over the obligations of PG&E and continue them= =20 to the end of 2002. Such assumption and continuation, would be combined wi= th=20 the government entity recieving the benefits of the difference between=20 market prices and embedded costs of the SCE/PG&E existing generation assets= . Summary of Solution that incorporates these suggestions Government entity becomes an ESP taking over all customers not served by=20 another ESP. Government accepts any ESP's that come back within 3 weeks. Utilities stopped from selling any additional nuclear, hydro, thermal or QF= =20 generation. (requires change in legislation) Utilities provide surcharge/credit, for the lessor of 40 years or retiremen= t,=20 based on the difference between generation COS and market value to all ESPs= ,=20 after rate freeze ends (requires change in legislation and settlement). Government entity, as ESP, charges Frozen Rate plus 10% until the end of= =20 2002. Government entity, assures all ESP that they will their costs will not exce= ed=20 110% of frozen rate until the end of 2002. Rate freeze and surcharge continue until the end of March 2002. Any shortfall of agency would be recovered through a amortization over the= =20 next 15 years with securitization less positive proceeds from auctioning=20 default provider. (requires change in legislation) Government commit to building 10,000 MW of generation by summer of 2002 Government commit to allowing emmission constrainted generators to buy=20 emission credits Goverment change legislation to allow swift DSM activity From: James D Steffes@ENRON on 01/11/2001 10:42 PM To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Mark=20 Palmer/Corp/Enron@ENRON, Michael Tribolet/Corp/Enron@Enron, Harry=20 Kingerski/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Susan J=20 Mara/NA/Enron@ENRON, Joe Hartsoe/Corp/Enron@ENRON, Sarah=20 Novosel/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON, Alan=20 Comnes/PDX/ECT@ECT, Mary Hain/HOU/ECT@ECT, Paul Kaufman/PDX/ECT@ECT, Sandra= =20 McCubbin/NA/Enron@Enron, Roger Yang/SFO/EES@EES, Scott Stoness/HOU/EES@EES,= =20 Robert Badeer/HOU/ECT@ECT, Tim Belden/HOU/ECT@ECT, Stephen Swain/PDX/ECT@EC= T,=20 Travis McCullough/HOU/ECT@ECT, Andre=20 Cangucu/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Shelia Benke/Corp/Enron@Enron,= =20 Vicki Sharp/HOU/EES@EES, Wanda Curry/HOU/EES@EES, Don Black/HOU/EES@EES,=20 Gordon Savage/HOU/EES@EES, Donna Fulton/Corp/Enron@ENRON, William S=20 Bradford/HOU/ECT@ECT cc: =20 Subject: Financial Analysis of PG&E and Proposed Terms for Settlement Attached please find three documents that outlines the economics of LT=20 contracting necessary for PG&E and SCE. Also find some thoughts on element= s=20 of a workable settlement. Call me with any questions. Jim Scott Stoness 01/11/2001 05:09 PM To: James D Steffes/NA/Enron@ENRON cc: Don Black/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron=20 Subject: Re: Treasury (keep PG&E) Solvent Strategy =20 Great idea. My strategy was solve the immediate problem of solvency quickl= y=20 by getting the government to step in while the rules of the RFP are defined= ,=20 then do the auction, but if you think we could go straight to an RFP for=20 standard offer without going bankrupt, I would be for it. I believe that we do not have time for an RFP (6 months) so that we should= =20 get the government entity to step in to give us the time. And auction by rate class would be good but noone would want the large=20 classes because their rate increase will be higher and they will be less=20 likely to stay. Scott From: James D Steffes@ENRON on 01/11/2001 03:25 PM To: Scott Stoness/HOU/EES@EES cc: Don Black/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron=20 Subject: Re: Treasury (keep PG&E) Solvent Strategy =20 What about something different? If we asked for an Auction by rate class that would allow a different compa= ny=20 to market the default service. The competitive bids would be used to reduc= e=20 the overall undercollection. So in your ST point #1, replace Government=20 entity with a Competitive ESP that has paid the most to win that right. Jim =09Scott Stoness@EES =0901/11/2001 02:39 PM =09=09=20 =09=09 To: James D Steffes/NA/Enron@Enron =09=09 cc: Harry Kingerski/NA/Enron@Enron, Don Black =09=09 Subject: Treasury (keep PG&E) Solvent Strategy Solution Government entity becomes an ESP taking over all customers not served by=20 another ESP. Government accepts any ESP's that come back within 3 weeks Utilities stopped from selling any additional nuclear, hydro, thermal or QF= =20 generation. Utilities provide surcharge/credit, for the lessor of 40 years or retiremen= t,=20 based on the difference between generation COS and market value to all ESPs= ,=20 after rate freeze ends. Government entity, as ESP, charges Frozen Rate plus 10% until the end of= =20 2002. Government entity, assures all ESP that they will their costs will not exce= ed=20 110% of frozen rate until the end of 2002. Rate freeze and surcharge continue until the end of March 2002. Any shortfall of agency would be recovered through a amortization over the= =20 next 15 years with securitization less positive proceeds from auctioning=20 default provider. Other: Government commit to building 10,000 MW of generation by summer of 2002 Government commit to allowing emmission constrainted generators to buy=20 emission credits Goverment change legislation to allow swift DSM activity