Message-ID: <19474206.1075840902595.JavaMail.evans@thyme> Date: Mon, 9 Apr 2001 22:09:00 -0700 (PDT) From: james.steffes@enron.com To: john.lavorato@enron.com, louise.kitchen@enron.com, mark.frevert@enron.com, greg.whalley@enron.com, tim.belden@enron.com, phillip.allen@enron.com, christopher.calger@enron.com, steven.kean@enron.com, richard.shapiro@enron.com, ray.alvarez@enron.com Subject: Summary of the Socal Edison MOU Announced Today (4.9.01) Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: James D Steffes X-To: John J Lavorato , Louise Kitchen , Mark Frevert , Greg Whalley , Tim Belden , Phillip K Allen , Christopher F Calger , Steven J Kean , Richard Shapiro , Ray Alvarez X-cc: X-bcc: X-Folder: \ExMerge - Kitchen, Louise\'Americas\Regulatory X-Origin: KITCHEN-L X-FileName: louise kitchen 2-7-02.pst Agreement in principle. Still need to negotiate definitive contracts. Man= y parties still have to agree with this proposed solution before its final = (including the Legislature). This looks very good for SCE. Jim ---------------------- Forwarded by James D Steffes/NA/Enron on 04/09/2001 = 07:03 PM --------------------------- From:=09Jeff Dasovich on 04/09/2001 07:00 PM Sent by:=09Jeff Dasovich To:=09Alan Comnes/PDX/ECT@ECT, Angela Schwarz/HOU/EES@EES, Beverly Aden/HOU= /EES@EES, Bill Votaw/HOU/EES@EES, Brenda Barreda/HOU/EES@EES, Carol Moffett= /HOU/EES@EES, Cathy Corbin/HOU/EES@EES, Chris H Foster/HOU/ECT@ECT, Christi= na Liscano/HOU/EES@EES, Craig H Sutter/HOU/EES@EES, Dan Leff/HOU/EES@EES, D= ebora Whitehead/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Don Black/HOU/EE= S@EES, Dorothy Youngblood/HOU/ECT@ECT, Douglas Huth/HOU/EES@EES, Edward Sac= ks/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= D Steffes/NA/Enron@ENRON, James W Lewis/HOU/EES@EES, James Wright/Western = Region/The Bentley Company@Exchange, Jeff Messina/HOU/EES@EES, Jeremy Blach= man/HOU/EES@EES, Jess Hewitt/HOU/EES@EES, Joe Hartsoe/Corp/Enron@ENRON, Kar= en Denne/Corp/Enron@ENRON, 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/H= OU/EES@EES, Marty Sunde/HOU/EES@EES, Meredith M Eggleston/HOU/EES@EES, Mich= ael Etringer/HOU/ECT@ECT, Michael Mann/HOU/EES@EES, Michelle D Cisneros/HOU= /ECT@ECT, mpalmer@enron.com, Neil Bresnan/HOU/EES@EES, Neil Hong/HOU/EES@EE= S, Paul Kaufman/PDX/ECT@ECT, Paula Warren/HOU/EES@EES, Richard L Zdunkewicz= /HOU/EES@EES, Richard Leibert/HOU/EES@EES, Richard Shapiro/NA/Enron@ENRON, = Rita Hennessy/NA/Enron@ENRON, Roger Yang/SFO/EES@EES, Rosalinda Tijerina/HO= U/EES@EES, Sandra McCubbin/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, = Scott Gahn/HOU/EES@EES, Scott Stoness/HOU/EES@EES, Sharon Dick/HOU/EES@EES,= skean@enron.com, Tanya Leslie/HOU/EES@EES, Tasha Lair/HOU/EES@EES, Ted Mur= phy/HOU/ECT@ECT, Terri Greenlee/NA/Enron@ENRON, Tim Belden/HOU/ECT@ECT, Ton= y 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, Kathryn Corbally= /Corp/Enron@ENRON, Jubran Whalan/HOU/EES@EES, triley@enron.com, Richard B S= anders/HOU/ECT@ECT, Robert C Williams/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, = Greg Wolfe/HOU/ECT@ECT, James Wright/Western Region/The Bentley Company@Exc= hange, Dirk vanUlden/Western Region/The Bentley Company@Exchange, Steve Wal= ker/SFO/EES@EES, Jennifer Rudolph/HOU/EES@EES, Martin Wenzel/SFO/HOU/EES@EE= S, Douglas Condon/SFO/EES@EES, wgang@enron.com, Scott Govenar , Hedy Govenar @ ENRON, jklauber@llgm.com, Mi= ke D Smith/HOU/EES@EES, John Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, J= anel Guerrero/Corp/Enron@Enron, Eric Letke/DUB/EES@EES, Richard B Sanders/H= OU/ECT@ECT, gfergus@brobeck.com, Michael Tribolet/ENRON@enronXgate, Robert = Frank/NA/Enron@Enron, Richard B Sanders/HOU/ECT@ECT, gfergus@brobeck.com, S= usan J Mara/NA/Enron@ENRON, Mercy Gil/Enron@EnronXGate, Jennifer Thome/NA/E= nron@Enron, David Leboe/HOU/ECT@ECT cc:=09=20 Subject:=09Summary of the MOU The following is an outline of the basic terms of the Southern California E= dison Memorandum of Understanding: ?=09Commitment to Provide Power - SCE will keep its current generation plan= ts and other generation assets and commit them to provide power on a regula= ted cost-of-service basis for 10 years. ?=09Dedication of Power - Edison International will commit the entire outpu= t of Sunrise (one of Edison International's non-regulated generating facili= ties) to the State on a fixed price basis for 10 years. Phase I of Sunrise = is to be brought online by August 15, 2001. If not brought online by August= 15, 2001, Edison International shall be assessed a $2 million penalty. ?=09Transmission Sale - SCE will sell to the State its transmission assets = for approximately $2.76 billion (2.3 times the net book value of the assets= ), subject to certain adjustments. Of the $2.76 billion, the $1.5 billion g= ain on sale, will be used to reduce SCE's net undercollected amount as of J= anuary 31, 2001. In connection with the purchase, the State will also assum= e certain liabilities associated with the transmission assets. ?=09Backup Transaction - If the transmission sale does not occur within two= years for reasons beyond the parties' control, then if the State elects, S= CE shall sell to the State SCE's hydro generation assets. If the hydro asse= ts are not worth $1.5 billion, then SCE will also sell the state after Dece= mber 31, 2010 enough below-market-price-power to make up the shortfall. ?=09Conservation Property - SCE shall grant perpetual conservation easement= s to the State covering approximately 260,000 acres of its Big Creek hydroe= lectric related lands and 825 acres of its Eastern Sierra hydroelectric rel= ated lands. Some of the land may be deeded in fee. ?=09Contribution by Edison International - Edison International will refund= to SCE not less than $400 million. This money will consist of a refund of= approximately $293 million in estimated 2000 quarterly tax payments plus a= pproximately $197 million in federal loss carryback tax savings. ?=09Investment - Edison International and SCE will invest not less than $3 = billion over the next 5 years in capital improvements for SCE. ?=09Litigation - SCE shall dismiss certain claims, including its takings an= d filed rate doctrine cases. ?=09CPUC Regulation - CPUC shall continue to regulate SCE using historical = principles of ratemaking. ?=09Payment for Portion of QF Drop-off - SCE shall pay an amount that repre= sents that portion of the net short from January 18, 2001 to April 1, 2001 = that is attributable to QF's not selling to SCE (due to SCE's failure to pa= y the QF's). SCE will securitize this amount. ?=09Securitization - SCE shall securitize its full net undercollected amoun= t (approx. $3.5 billion). The securitization shall occur in two tranches (= i.e. two different nonbypassable dedicated rate components). ?=09The first tranche will occur after the passage of legislation and the s= igning of the definitive agreements and will cover the net undercollected a= mount, less the gain on sale, plus interest on certain obligations in the n= et undercollected amount. ?=09The second tranche would be triggered if the transmission sale does not= occur within two years. Accordingly, the second tranche would not show up= in rates for two years, if at all. ?=09Buying the Net Short - The State will be required to buy the net short = through December 31, 2002. After 2002 SCE will be responsible for covering= the net short. ?=09Investment Recovery - SCE shall have an authorized rate of return that = will not drop below its current rte (11.6%) during the 10 year cost of serv= ice ratemaking period. ?=09Next Steps (Definitive Agreements and CPUC Action): ?=09Definitive Agreements - Once the MOU is signed, the next stage is to ne= gotiate definitive agreements which contain the specific terms of the trans= mission sale, as well as the specific terms of the various other related ag= reements (e.g., the O&M Agreement, Transmission Services Agreement and the = Facilities Services Agreement). ?=09CPUC Action - Prior to entering into the definitive agreements, the CPU= C must undertake certain actions (which include: establishing mechanisms fo= r preapproval of procurement costs and URG costs, deferring SCE's general r= ate case until 2003, granting SCE some relief from direct access credits an= d clarifying the first priority condition in the holding company act).