Message-ID: <28349342.1075848133442.JavaMail.evans@thyme> Date: Sat, 3 Feb 2001 15:44:00 -0800 (PST) From: jeff.dasovich@enron.com To: alan.comnes@enron.com, angela.schwarz@enron.com, beverly.aden@enron.com, bill.votaw@enron.com, brenda.barreda@enron.com, carol.moffett@enron.com, cathy.corbin@enron.com, chris.foster@enron.com, christina.liscano@enron.com, christopher.calger@enron.com, craig.sutter@enron.com, dan.leff@enron.com, debora.whitehead@enron.com, dennis.benevides@enron.com, don.black@enron.com, dorothy.youngblood@enron.com, douglas.huth@enron.com, edward.sacks@enron.com, eric.melvin@enron.com, erika.dupre@enron.com, evan.hughes@enron.com, fran.deltoro@enron.com, frank.vickers@enron.com, gayle.muench@enron.com, ginger.dernehl@enron.com, gordon.savage@enron.com, harold.buchanan@enron.com, harry.kingerski@enron.com, iris.waser@enron.com, james.steffes@enron.com, james.lewis@enron.com, james.wright@enron.com, jeff.messina@enron.com, jeremy.blachman@enron.com, jess.hewitt@enron.com, joe.hartsoe@enron.com, karen.denne@enron.com, kathy.bass@enron.com, kathy.dodgen@enron.com, ken.gustafson@enron.com, kevin.hughes@enron.com, leasa.lopez@enron.com, leticia.botello@enron.com, mark.muller@enron.com, marsha.suggs@enron.com, marty.sunde@enron.com, meredith.eggleston@enron.com, michael.etringer@enron.com, michael.mann@enron.com, michelle.cisneros@enron.com, mike.smith@enron.com, mpalmer@enron.com, neil.bresnan@enron.com, neil.hong@enron.com, paul.kaufman@enron.com, paula.warren@enron.com, richard.zdunkewicz@enron.com, richard.leibert@enron.com, richard.shapiro@enron.com, rita.hennessy@enron.com, robert.badeer@enron.com, roger.yang@enron.com, rosalinda.tijerina@enron.com, sandra.mccubbin@enron.com, sarah.novosel@enron.com, scott.gahn@enron.com, scott.stoness@enron.com, sharon.dick@enron.com, skean@enron.com, susan.mara@enron.com, tanya.leslie@enron.com, tasha.lair@enron.com, ted.murphy@enron.com, terri.greenlee@enron.com, tim.belden@enron.com, tony.spruiell@enron.com, vicki.sharp@enron.com, vladimir.gorny@enron.com, wanda.curry@enron.com, william.bradford@enron.com, kathryn.corbally@enron.com, jubran.whalan@enron.com, triley@enron.com, richard.sanders@enron.com, robert.williams@enron.com, greg.wolfe@enron.com, james.wright@enron.com, dirk.vanulden@enron.com, steve.walker@enron.com Subject: Ken Lay's Meeting w/Davis' Energy Advisors Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Jeff Dasovich X-To: Alan Comnes, Angela Schwarz, Beverly Aden, Bill Votaw, Brenda Barreda, Carol Moffett, Cathy Corbin, Chris H Foster, Christina Liscano, Christopher F Calger, Craig H Sutter, Dan Leff, Debora Whitehead, Dennis Benevides, Don Black, Dorothy Youngblood, Douglas Huth, Edward Sacks, Eric Melvin, Erika Dupre, Evan Hughes, Fran Deltoro, Frank W Vickers, Gayle W Muench, Ginger Dernehl, Gordon Savage, Harold G Buchanan, Harry Kingerski, Iris Waser, James D Steffes, James W Lewis, James Wright, Jeff Messina, Jeremy Blachman, Jess Hewitt, Joe Hartsoe, Karen Denne, Kathy Bass, Kathy Dodgen, Ken Gustafson, Kevin Hughes, Leasa Lopez, Leticia Botello, Mark S Muller, Marsha Suggs, Marty Sunde, Meredith M Eggleston, Michael Etringer, Michael Mann, Michelle D Cisneros, Mike M Smith, mpalmer@enron.com, Neil Bresnan, Neil Hong, Paul Kaufman, Paula Warren, Richard L Zdunkewicz, Richard Leibert, Richard Shapiro, Rita Hennessy, Robert Badeer, Roger Yang, Rosalinda Tijerina, Sandra McCubbin, Sarah Novosel, Scott Gahn, Scott Stoness, Sharon Dick, skean@enron.com, Susan J Mara, Tanya Leslie, Tasha Lair, Ted Murphy, Terri Greenlee, Tim Belden, Tony Spruiell, Vicki Sharp, Vladimir Gorny, Wanda Curry, William S Bradford, Kathryn Corbally, Jubran Whalan, triley@enron.com, Richard B Sanders, Robert C Williams, Greg Wolfe, James Wright, Dirk vanUlden, Steve Walker X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf On Friday, I attended a meeting with Ken Lay and Karen Denne that Mike Peev= ey=20 and David Freeman requested. Mike Peevey was President of Southern=20 California Edison before founding NEV (which he eventually sold to AES). = =20 Freeman is General Manager of LADWP. =20 The Governor hired Peevey to be his chief energy advisor. Freeman is the= =20 Governor=01,s chief negotiator responsible for signing power contracts on b= ehalf=20 of DWR now that the Legislature has passed AB1X and the Governor has signed= =20 it. John Burton, the leader of the State Senate, is responsible for gettin= g=20 the Freeman the job of chief negotiator, but Peevey was clearly in charge. = =20 Also at the meeting was Vikram Budraja, former SVP of power systems and=20 planning for Edison. He=01,s now a private consultant that Freeman hired t= o=20 help him with the contract negotiations. Peevey asked for the meeting to urge Enron to respond to DWR=01,s RFP issue= d on=20 Friday. Peevey/Freeman want to announce a package of deals on Tuesday. Th= ey=20 implied that they=01,ve already got some deals done and expect to have 8+ d= eals=20 to announce on Tuesday, though they gave no details other than to say that= =20 they=01,ve got a deal with Calpine (as reported in the press). Their plan = is to=20 announce on Tuesday the names of the suppliers they=01,ve signed with, the = total=20 number of megawatts signed, and the average price per MW. They are concern= ed=20 that the media will want them to make public the details of each individual= =20 deal, which for obvious reasons they don=01,t want to do. Peevey and Freeman also said that they don=01,t want to sign too many long-= term=20 contracts though they recognize that there=01,s a trade-off between term an= d=20 price. Ken Lay told them that Enron would respond. ENA is preparing a response. = He=20 also told them that EES was working on a plan to reduce demand at our=20 customers=01, facilities and that the plan would be completed and ready for= =20 implementation very soon. I=01,ve summarized the points that Ken Lay made and the responses from Peev= ey=20 and Freeman: It would be difficult to enter into contracts without some assurance that D= WR=20 is creditworthy. Response from Peevey/Freeman: AB1X provides DWR the funds necessary=01*beginning on Friday, Feb 1st=01*to= =20 purchase the power necessary to fill the utilities=01, short position. Ken= Lay=20 pressed them on this point and Peevey insisted that AB1X provides the funds= =20 needed to pay suppliers. The RFP should give suppliers maximum flexibility in coming up with proposa= ls. Response from Peevey/Freeman: Be as creative as possible. All offers will be considered (despite the=20 language contained in the RFP). The only customers who have been protected from California=01,s failed=20 restructuring law are customers who chose another provider under Direct=20 Access. In addition, one of the quickest ways to help solve California=01,= s=20 shortage is to work with customers to reduce demand and develop on-site=20 generation. Taking away Direct Access and access to customers generally=01= *as=20 AB1X does=01*is therefore a dumb idea and must be reversed. Response from Peevey: He agreed but said that it was impossible to remove it from the bill. He= =20 affirmed what we already know=01*that the head of the Senate oversight comm= ittee=01* Debra Bowen=01*is working on a =01&clean-up=018 bill to remove the prohibit= ion. In=20 response to Ken Lay=01,s points that California needed to make sure that ut= ility=20 interconnection and stand-by rates didn=01,t continue to impede on-site=20 generation, Peevey and Freeman said that the Governor understood the proble= m=20 and was prepared to fix it. Siting laws have got to be streamlined and California (i.e., the Governor)= =20 has got to credibly commit to the swift development of new power plants in= =20 order to push the forward curve down. Response from Peevey/Freeman: The Governor is scheduled to offer a plan this week that is targeted at=20 expediting siting and development. DWR should accept demand reduction bids at the same time that it accepts=20 supply-side bids. Response from Peevey/Freeman: They agreed but said that there is extreme political pressure to announce t= he=20 signing of some supply deals on Tuesday in order to prove to legislators th= at=20 DWR will be able to keep the lights on, and at a =01&reasonable=018 price. = They=20 also need to sign some deals in light of the fact that the feds are very=20 unlikely to extend the DOE order forcing suppliers to sell to the IOUs. On= ce=20 they=01,ve shown that they can manage the supply side, Peevey and Freeman s= aid=20 they want to quickly turn their attention to demand-side bidding. These are the highlights. I=01,d be happy to give more details on the Mond= ay=20 morning \call. Best, Jeff