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Date: Fri, 11 May 2001 08:00:00 -0700 (PDT)
From: kristin.walsh@enron.com
To: john.lavorato@enron.com, louise.kitchen@enron.com
Subject: California Update 5/11/01
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? The extraordinary session is expected to close early next week, after the 
governor has signed SB 28X, a power plant siting bill.  Yesterday, the 
governor signed bond financing bill SB 31X.  Once the extraordinary session 
is closed, a new extraordinary session is expected to be opened immediately.  
However, sources report that no one is certain if the bills from this session 
will have the same numbers in the next session.  The legislature reportedly 
is trying to arrange so that the bills will not have to be heard again in 
committee.

? The MOU still does not have a sponsor.  Governor Davis hopes to reach a 
deal with Sempra for the state to purchase San Diego Gas and Electric's 
transmission assets.  He reportedly feels that by having deals in place with 
SoCal and SDG&E, enough momentum might be added to push the MOU through the 
legislature.  He then could go to the bankruptcy court and propose adding 
PG&E's assets, since he would have two of the three pieces in place.  The 
validity of this logic seems questionable at best.  Sources are skeptical 
that adding SDG&E to the MOU would increase the chances of the deal going 
through the legislature.  Also, the governor has claimed to be close to 
having a deal with SDG&E for several weeks, but such a deal has not yet been 
finalized.  The governor stated that he will have a sponsor for the MOU by 
next week when the bill will be introduced.  The MOU might be introduced in 
the legislature, then amended to indicate a lesser amount for the 
transmission asset purchase.  This still would not assure passage since so 
many legislators reportedly are against the MOU.

? The windfall profits tax bill has not been set for hearing on the Assemble 
floor.  

? State Legislature, Elizabeth Hill, published a report earlier this week 
regarding an analysis of state revenues.  The report stated that revenues for 
this year would be $3.4B less that was expected in January 2001, not 
including electricity costs.  She predicts that ongoing state programs will 
have to be cut by approximately $1.7B.

? Moody's has put California's credit rating under review for another 
downgrade.  Sources report that Moody's, S&P, and MBIA have all informed 
California that "the only way the state will improve its credit rating and 
look better to investors is to get out of the power business and resolve the 
undercollected."