Subject: Update--Day 2 of California PUC Hearings
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], james
Date: Thu, 28 Dec 2000 12:36:00 -0800 (PST)

Today's hearing was dominated by :
1) many lawyers arguing over whether the Commission must declare that the 
"rate freeze" is over before raising rates, or whether the Commission can 
rely on its general constitutional and statutory authority to raise rates on 
an interim basis, without addressing the issue of the rate freeze, and, 
1) an appearance by Ralph Nader.

The Legal Issue
In general, our proposal seems to have gotten some traction.  Whether it 
sticks remains to be seen, however.  We proposed that:

The Commission has the authority to raise rates without addressing the rate 
freeze issue.
The Commission will not have the facts it needs, and it won't have  provided 
the due process necessary by Jan 4th, to address all the complex issues tied 
to the rate freeze.  And if it tries, it's likely to face a flurry of law 
suits, which is in no one's best interest.
For it's Jan 4th decision, the Commission should confine itself to 
determining whether, and if so by how much, to raise rates to maintain the 
utilities' access to capital markets. (We've taken no position on whether 
there's a need to raise rates.)
setting a hearing schedule to examine the "rate freeze" and all related 
issues thoroughly and methodically.

The utilities argued that the Commission must declare an end to the rate 
freeze; otherwise any Commission decision to raise rates would be easy to 
attack in the courts.  (In reality, the utilities want the Commission to end 
the rate freeze in order to assure lenders that the Commission will permit 
the utilities to recover going-forward procurement costs.  Under the rate 
freeze, the utility is at risk for procurement costs that exceed the rate 
freeze.)

In his presentation, our outside counsel offered numerous citations to past 
Commission decision and court cases supporting the Commission's ability to 
raise rates if it found it necessary to do so.  Many other parties agreed 
with our position.  A few parties said that the issue was too murky to make a 
call.  During questioning, both the President of the Commission (Loretta 
Lynch) and the presiding judge seemed to indicate that they believe the 
Commission has ample authority to raise rates without having to address the 
rate freeze issues. 

The Ralph Factor
Apparently, having lost the Presidential election, Ralph Nader's still 
looking for work.  He showed up at the hearings today and held a very lengthy 
news conference.  From what I could hear, he targeted all of his criticism at 
the utilities for being greedy, and at the Governor for being too ready and 
willing to bail the utilities out.  Even when thrown some soft balls about 
"out of state generators," Nader stuck to bashing the Governor and the 
utilities.  But I couldn't hear the entire press conference, so he may have 
said things that I missed.

The Next Steps
The hearings that were scheduled to end today will now go into next week. 
Tomorrow, the utilities are scheduled to make their case for financial 
hardship.  Customers intend to question the utilities very aggressively (as 
does the PUC).  The utilities will also have the chance to question the 
consumer representatives who filed their own proposals and analysis with the 
Commission.
On Tuesday, the Commission is likely to take up the issue of how big any rate 
increase needs to be and how much of the increase each customer group should 
shoulder. 

More tomorrow on the call.

Best,
Jeff

	Jeff Dasovich
	Sent by: Jeff Dasovich
	12/27/2000 08:57 PM
		
		 To: Roger Yang/SFO/EES@EES, [email-masked], Richard Shapiro/NA/Enron, James 
D Steffes/NA/Enron, Paul Kaufman/PDX/ECT, Sandra McCubbin/NA/Enron, Susan J 
Mara/NA/Enron, [email-masked], Karen Denne/Corp/Enron, Joe 
Hartsoe/Corp/Enron, Sarah Novosel/Corp/Enron, Alan Comnes/PDX/ECT, Harry 
Kingerski/NA/Enron, Tim Belden/HOU/ECT, Frank W Vickers/HOU/ECT, Robert 
Badeer/HOU/ECT, Chris H Foster/HOU/ECT
		 cc: Beverly Aden/HOU/EES@EES, Brenda Barreda/HOU/EES@EES, Carol 
Moffett/HOU/EES@EES, Cathy Corbin/HOU/EES@EES, Christina Liscano/HOU/EES@EES, 
Dan Leff/HOU/EES@EES, Debora Whitehead/HOU/EES@EES, Dennis 
Benevides/HOU/EES@EES, Don Black/HOU/EES@EES, Dorothy Youngblood/HOU/ECT@ECT, 
Edward Sacks/Corp/Enron@ENRON, Eric Melvin/HOU/EES@EES, Erika 
Dupre/HOU/EES@EES, Evan Hughes/HOU/EES@EES, Fran Deltoro/HOU/EES@EES, Gayle W 
Muench/HOU/EES@EES, Ginger Dernehl/NA/Enron@ENRON, Gordon Savage/HOU/EES@EES, 
Harold G Buchanan/HOU/EES@EES, Harry Kingerski/NA/Enron@ENRON, Iris 
Waser/HOU/EES@EES, James W Lewis/HOU/EES@EES, Jeremy Blachman/HOU/EES@EES, 
Jess Hewitt/HOU/EES@EES, Kathy Bass/HOU/EES@EES, Kathy Dodgen/HOU/EES@EES, 
Ken Gustafson/HOU/EES@EES, Kevin Hughes/HOU/EES@EES, Leasa Lopez/HOU/EES@EES, 
Leticia Botello/HOU/EES@EES, Mark S Muller/HOU/EES@EES, Marsha 
Suggs/HOU/EES@EES, Marty Sunde/HOU/EES@EES, Meredith M Eggleston/HOU/EES@EES, 
Mike M Smith/HOU/EES@EES, Neil Bresnan/HOU/EES@EES, Neil Hong/HOU/EES@EES, 
Paula Warren/HOU/EES@EES, Richard Shapiro/NA/Enron@ENRON, Rita 
Hennessy/NA/Enron@ENRON, Rosalinda Tijerina/HOU/EES@EES, Scott 
Gahn/HOU/EES@EES, Scott Stoness/HOU/EES@EES, Sharon Dick/HOU/EES@EES, Tanya 
Leslie/HOU/EES@EES, Tasha Lair/HOU/EES@EES, Ted Murphy/HOU/ECT@ECT, Terri 
Greenlee/NA/Enron@ENRON, Tony Spruiell/HOU/EES@EES, Vicki Sharp/HOU/EES@EES, 
Vladimir Gorny/HOU/ECT@ECT, Wanda Curry/HOU/EES@EES, William S 
Bradford/HOU/ECT@ECT
		 Subject: Update--Day 1 of California PUC Hearings      

Thanks Roger.  Here are the highlights of today's hearings:

 Common themes--many tracked ours pretty closely
Not a question of whether rates need to rise, but by how much.
Though some oppose any and all rate increases, the lion's share acknowledged 
that the utilities have a cash flow problem and the a rate increase is 
necessary.
Due process matters. 
If the Commission is thinking about going as far as ending rate freezes and 
increasing rates, it better provide for ample due process, or countless law 
suits will ensue.
Don't jump the gun.  
A rate increase is likely, but only the utilities benefit from adoption of 
the utilities' proposals. The Commission needs to carefully scrutinize the 
utilities' claims and take a careful look at the level of increase required 
to maintain access to capital markets.  However, as expected, the utilities 
implored the Commission to jump the gun immediately.  The utilities want the 
Commission to declare an end to the rate freeze and raise rates on Jan.4.
No more divestiture.  
The utility should keep the generating assets it retained, but the Commission 
should ensure that the assets' benefits are allocated equally among all 
customers.  One legislator recommended that the State buy the utilities' 
hydro assets, which would give the utilities the cash they need and give the 
state control over some generation.
Treat all customers equally and fairly.
The Commission should not create two classes of customers (e.g., large v. 
small; direct access v. bundled).  No customer group should be sacrificied to 
save another.
Be as narrow as possible/do as little harm as possible
The immediate problem is the utility's cash/credit crunch.  As such, the 
Commission should do only enough to solve this very specific, immediate 
problem.  A modest rate increase is all that's required and the Commission 
should do no more.

At the beginning and the end of the hearing, the President of the Commission 
asked parties to be prepared (at tomorrow's hearing) to discuss whether the 
Commission could legally use its other, broad powers to raise rates without 
declaring an end to the rate freeze.  It seems that she seems some benefit in 
raising rates, but leaving AB 1890 otherwise intact untill the Commission can 

Marketers and generators are to blame for the problem
Though not universally embraced, the theme came up repeatedly. 

A few parties (e.g., the Unions, low income consumer groups, one PUC 
commissioner) called for complete re-regulation of the industry, returning 
the utilities to vertically integrated monopolies.  But they were the 
exception rather than the rule at today's hearing.

2. Next steps
There hearings were scheduled to end on Thursay, but now will continue 
through Friday.
Tomorrow, lawyers will provide "oral" arguments on whether the Commission 
must end the rate freeze in order to increase rates.  We will argue that it 
does not have to, and should not, go through the complex and controversial 
exercise of determing whether the rate freeze is over between now and 
01.04.01.  We will argue that the Commission has the authority to raise rates 
without ending the rate freeze, and if it decides to raise rates, it should 
do so while keeping AB 1890's basic structure in place until a full and fair 
hearing of the issues is completed.   We are talking to other stakeholders to 
persuade them to take the same approach.  In terms of legal arguments, this 
is clearly a long shot, but one that seems worth taking.
After the oral argument, the utilities will present their rate proposals and 
"all interested persons" will have the opportunity to cross-examine the 
utilities (in short, tomorrow will also be a zoo).
When asked what the process will be for issuing a proposed decision and 
providing comments, the President of the Commission responded "we don't know, 
it's evolving."  In other words, the Commission is doing a poor job of 
ensuring that their Jan 4 decision is "appeal-proof."
Keep in mind that the situation remains extremely fluid and the trend is 
still toward ending the rate freeze on Jan. 4th.  We continue to aggressively 
offer alternatives to that possibility and continue to try to bring other 
stakeholders to our side.
We're doing everything necessary to preserve our appeal rights.

We can discuss further on the 10 AM (CST) call tomorrow.

Best,
Jeff

	Roger Yang@EES
	12/27/2000 05:43 PM
		
		 To: Leticia Botello/HOU/EES@EES
		 cc: Ted Murphy/HOU/ECT@ECT, Dennis Benevides/HOU/EES@EES, James W 
Lewis/HOU/EES@EES, Scott Stoness/HOU/EES@EES, Don Black/HOU/EES@EES, Tony 
Spruiell/HOU/EES@EES, Mike M Smith/HOU/EES@EES, Meredith M 
Eggleston/HOU/EES@EES, Neil Hong/HOU/EES@EES, Evan Hughes/HOU/EES@EES, Neil 
Bresnan/HOU/EES@EES, Jess Hewitt/HOU/EES@EES, Vladimir Gorny/HOU/ECT@ECT, 
William S Bradford/HOU/ECT@ECT, Jeff Dasovich/NA/Enron@Enron, Eric 
Melvin/HOU/EES@EES, Scott Gahn/HOU/EES@EES, Gayle W Muench/HOU/EES@EES, 
Gordon Savage/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron, Ken 
Gustafson/HOU/EES@EES, Edward Sacks/Corp/Enron@Enron, Richard 
Shapiro/NA/Enron@Enron, Marty Sunde/HOU/EES@EES, Dan Leff/HOU/EES@EES, Vicki 
Sharp/HOU/EES@EES, Kevin Hughes/HOU/EES@EES, Jeremy Blachman/HOU/EES@EES, 
Harold G Buchanan/HOU/EES@EES, Mark S Muller/HOU/EES@EES, Kathy 
Bass/HOU/EES@EES, Rosalinda Tijerina/HOU/EES@EES, Debora 
Whitehead/HOU/EES@EES, Leasa Lopez/HOU/EES@EES, Christina 
Liscano/HOU/EES@EES, Tasha Lair/HOU/EES@EES, Erika Dupre/HOU/EES@EES, Rita 
Hennessy/NA/Enron@Enron, Brenda Barreda/HOU/EES@EES, Marsha 
Suggs/HOU/EES@EES, Carol Moffett/HOU/EES@EES, Kathy Dodgen/HOU/EES@EES, Cathy 
Corbin/HOU/EES@EES, Sharon Dick/HOU/EES@EES, Beverly Aden/HOU/EES@EES, Tanya 
Leslie/HOU/EES@EES, Paula Warren/HOU/EES@EES, Wanda Curry/HOU/EES@EES, Ginger 
Dernehl/NA/Enron@Enron, Dorothy Youngblood/HOU/ECT@ECT, Terri 
Greenlee/NA/Enron@ENRON, Fran Deltoro/HOU/EES@EES, Iris Waser/HOU/EES@EES
		 Subject: Re: Reminder - Level Setting Mtg-California Markets Focus Group 
EB2868

Got an update from Jeff Dasovich.  No earth shattering news.  Comments have 
been all over the place.  The impression is being made by differing parties 
that the issues are very complex and would inevitably result in endless 
lawsuits.  Possible conclusion by the CPUC may be to invoke emergency powers 
to implement an emergency surcharge and avoid addressing the issue of when 
the rate freeze ends in these hearings.  However, this is just speculation.  
Jeff will return to the office by 5:00 pm PST and will send out a summary of 
today's hearings.

Roger

Leticia Botello
12/27/2000 06:57 AM
To: Ted Murphy/HOU/ECT@ECT, Dennis Benevides/HOU/EES@EES, James W 
Lewis/HOU/EES@EES, Scott Stoness/HOU/EES@EES, Don Black/HOU/EES@EES, Tony 
Spruiell/HOU/EES@EES, Mike M Smith/HOU/EES@EES, Meredith M 
Eggleston/HOU/EES@EES, Neil Hong/HOU/EES@EES, Evan Hughes/HOU/EES@EES, Neil 
Bresnan/HOU/EES@EES, Jess Hewitt/HOU/EES@EES, Vladimir Gorny/HOU/ECT@ECT, 
William S Bradford/HOU/ECT@ECT, Jeff Dasovich/NA/Enron@Enron, Eric 
Melvin/HOU/EES@EES, Scott Gahn/HOU/EES@EES, Gayle W Muench/HOU/EES@EES, 
Gordon Savage/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron, Ken 
Gustafson/HOU/EES@EES, Edward Sacks/Corp/Enron@Enron, Roger Yang/SFO/EES@EES, 
Richard Shapiro/NA/Enron@Enron
cc: Marty Sunde/HOU/EES@EES, Dan Leff/HOU/EES@EES, Vicki Sharp/HOU/EES@EES, 
Kevin Hughes/HOU/EES@EES, Jeremy Blachman/HOU/EES@EES, Harold G 
Buchanan/HOU/EES@EES, Mark S Muller/HOU/EES@EES, Kathy Bass/HOU/EES@EES, 
Rosalinda Tijerina/HOU/EES@EES, Debora Whitehead/HOU/EES@EES, Leasa 
Lopez/HOU/EES@EES, Christina Liscano/HOU/EES@EES, Tasha Lair/HOU/EES@EES, 
Erika Dupre/HOU/EES@EES, Rita Hennessy/NA/Enron@Enron, Brenda 
Barreda/HOU/EES@EES, Marsha Suggs/HOU/EES@EES, Carol Moffett/HOU/EES@EES, 
Kathy Dodgen/HOU/EES@EES, Cathy Corbin/HOU/EES@EES, Sharon Dick/HOU/EES@EES, 
Beverly Aden/HOU/EES@EES, Tanya Leslie/HOU/EES@EES, Paula Warren/HOU/EES@EES, 
Wanda Curry/HOU/EES@EES, Ginger Dernehl/NA/Enron@Enron, Dorothy 
Youngblood/HOU/ECT@ECT, Terri Greenlee/NA/Enron@ENRON, Fran 
Deltoro/HOU/EES@EES, Iris Waser/HOU/EES@EES 
Subject: Reminder - Level Setting Mtg-California Markets Focus Group EB2868

12/27/00

Time    Location Call In #  Pass Code

10:00 Central Standard Time  EB 2868  1-800-713-8600  80435

This is a recurring daily meeting until further notice  (this invitation will 
schedule your calendar through 1/31/01).

Time, Call In #, and Pass Code are the same for all meetings.  Conference 
room location will be changed as soon as possible to better accommodate the 
participants.  

Note:  Optional Invitees FYI Only

Please call me if you have any questions 

Leticia

x-58752