Subject: ATTORNEY CLIENT PRIVILEGE - Judge Wagner's Proposed Recommendation
From: [email-masked]
To: [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked]
Date: Mon, 9 Jul 2001 12:32:00 -0700 (PDT)

PLEASE FORWARD TO ANYONE APPROPRIATE:

Judge Wagner issued a public Proposed Recommendation (the media was in the 
room) to resolve the matters before the Settlement process late Monday 
afternoon.

He initially talked about "can bring a horse to water, but can't make him 
drink."  

He went on to detail that the Suppliers had offered $716.1MM for Settlement 
($510MM for Duke, Dynegy, Mirant, Williams, Reliant + $125MM for Powerex + 
$49.6MM for 15 marketers + $6.5MM for 6 CMUA members + $25MM for outside 
Calif Utilities [includes PGE]).  He said thought refunds in the hundred of 
$millions or maybe $1billion were right.

His will propose the following method to the Commission.  

1. Retroactively apply the June 19 Order from Oct 2 - June 19.
2. Modify that decision to (a) use actual heat rates from marginal unit in 
NP15 and SP15, (b) use two daily gas prices - north CA and south CA, (c) 
incorporate NOx costs, (c) add a 10% credit premium.
3. Commission should hold an expedited 60 day hearing on matters relating to 
questions of material facts (Mwh sold, gas prices, etc).

He did indicate that his perspective was that the moneys owed could be offset 
against CAISO bills.

Importantly, we are unsure if the Judge will recommend to have FERC  (a) 
determine that upon the application of this refund Order the rates are 
determined to be J&R, (b) ensure that all buyers in these markets get similar 
refunds, (c) limit the refund to not include CDWR and CAISO Out-of-Market 
transactions.

We are intending to communicate with the Judge's staff tomorrow on these 
issues to seek clarity.

Finally, is it appropriate to have Charles River Associates attempt to 
calculate the refund liability?  We may want to understand the risk under 
different assumptions.

Thanks,

Jim