Message-ID: <1311092.1075850464427.JavaMail.evans@thyme> Date: Thu, 28 Dec 2000 12:36:00 -0800 (PST) From: jeff.dasovich@enron.com To: jeff.dasovich@enron.com Subject: Update--Day 2 of California PUC Hearings Cc: alan.comnes@enron.com, beverly.aden@enron.com, brenda.barreda@enron.com, carol.moffett@enron.com, cathy.corbin@enron.com, chris.foster@enron.com, christina.liscano@enron.com, dan.leff@enron.com, debora.whitehead@enron.com, dennis.benevides@enron.com, don.black@enron.com, dorothy.youngblood@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, 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, mike.smith@enron.com, mpalmer@enron.com, neil.bresnan@enron.com, neil.hong@enron.com, paul.kaufman@enron.com, paula.warren@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, jeff.messina@enron.com, douglas.huth@enron.com, richard.leibert@enron.com, scott.gahn@enron.com, michael.mann@enron.com, angela.schwarz@enron.com, craig.sutter@enron.com, richard.zdunkewicz@enron.com, bill.votaw@enron.com, james.wright@enron.com, christopher.calger@enron.com, frank.vickers@enron.com, chris.foster@enron.com, tim.belden@enron.com, robert.badeer@enron.com, michael.etringer@enron.com, michelle.cisneros@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: alan.comnes@enron.com, beverly.aden@enron.com, brenda.barreda@enron.com, carol.moffett@enron.com, cathy.corbin@enron.com, chris.foster@enron.com, christina.liscano@enron.com, dan.leff@enron.com, debora.whitehead@enron.com, dennis.benevides@enron.com, don.black@enron.com, dorothy.youngblood@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, 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, mike.smith@enron.com, mpalmer@enron.com, neil.bresnan@enron.com, neil.hong@enron.com, paul.kaufman@enron.com, paula.warren@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, jeff.messina@enron.com, douglas.huth@enron.com, richard.leibert@enron.com, scott.gahn@enron.com, michael.mann@enron.com, angela.schwarz@enron.com, craig.sutter@enron.com, richard.zdunkewicz@enron.com, bill.votaw@enron.com, james.wright@enron.com, christopher.calger@enron.com, frank.vickers@enron.com, chris.foster@enron.com, tim.belden@enron.com, robert.badeer@enron.com, michael.etringer@enron.com, michelle.cisneros@enron.com X-From: Jeff Dasovich X-To: Jeff Dasovich X-cc: Alan Comnes, Beverly Aden, Brenda Barreda, Carol Moffett, Cathy Corbin, Chris H Foster, Christina Liscano, Dan Leff, Debora Whitehead, Dennis Benevides, Don Black, Dorothy Youngblood, 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, 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, Mike M Smith, mpalmer@enron.com, Neil Bresnan, Neil Hong, Paul Kaufman, Paula Warren, 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, Jeff Messina, Douglas Huth, Richard Leibert, Scott Gahn, Michael Mann, Angela Schwarz, Craig H Sutter, Richard L Zdunkewicz, Bill Votaw, James Wright, Christopher F Calger, Frank W Vickers, Chris H Foster, Tim Belden, Robert Badeer, Michael Etringer, Michelle D Cisneros X-bcc: X-Folder: \Steven_Kean_Nov2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf 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, skean@enron.com, Richard Shapiro/NA/Enron, James D Steffes/NA/Enron, Paul Kaufman/PDX/ECT, Sandra McCubbin/NA/Enron, Susan J Mara/NA/Enron, mpalmer@enron.com, 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