Message-ID: <5085861.1075844243530.JavaMail.evans@thyme>
Date: Wed, 23 May 2001 07:57:00 -0700 (PDT)
From: kristin.walsh@enron.com
To: john.lavorato@enron.com, louise.kitchen@enron.com
Subject: California Update #2, 5/23/01
Cc: christopher.calger@enron.com, phillip.allen@enron.com, tim.belden@enron.com, 
	jeff.dasovich@enron.com, chris.gaskill@enron.com, 
	mike.grigsby@enron.com, tim.heizenrader@enron.com, 
	vince.kaminski@enron.com, steven.kean@enron.com, 
	rob.milnthorp@enron.com, kevin.presto@enron.com, 
	claudio.ribeiro@enron.com, richard.shapiro@enron.com, 
	james.steffes@enron.com, mark.tawney@enron.com, 
	scott.tholan@enron.com, britt.whitman@enron.com, 
	lloyd.will@enron.com
Mime-Version: 1.0
Content-Type: text/plain; charset=ANSI_X3.4-1968
Content-Transfer-Encoding: 7bit
Bcc: christopher.calger@enron.com, phillip.allen@enron.com, tim.belden@enron.com, 
	jeff.dasovich@enron.com, chris.gaskill@enron.com, 
	mike.grigsby@enron.com, tim.heizenrader@enron.com, 
	vince.kaminski@enron.com, steven.kean@enron.com, 
	rob.milnthorp@enron.com, kevin.presto@enron.com, 
	claudio.ribeiro@enron.com, richard.shapiro@enron.com, 
	james.steffes@enron.com, mark.tawney@enron.com, 
	scott.tholan@enron.com, britt.whitman@enron.com, 
	lloyd.will@enron.com
X-From: Kristin Walsh
X-To: John J Lavorato, Louise Kitchen
X-cc: Christopher F Calger, Phillip K Allen, Tim Belden, Jeff Dasovich, Chris Gaskill, Mike Grigsby, Tim Heizenrader, Vince J Kaminski, Steven J Kean, Rob Milnthorp, Kevin M Presto, Claudio Ribeiro, Richard Shapiro, James D Steffes, Mark Tawney, Scott Tholan, Britt Whitman, Lloyd Will
X-bcc: 
X-Folder: \Richard_Shapiro_June2001\Notes Folders\Discussion threads
X-Origin: SHAPIRO-R
X-FileName: rshapiro.nsf

Republican Plan B
A source reports the following regarding the Republican Plan B proposal:
? Encourage direct access for consumers.  (The problem with this, however, is 
that these direct access deals would not have a dedicated rate component, and 
too many might undermine the cash flow and credit worthiness of the bonds.)
? The Republicans will "suggest" that generators take a 30% haircut.  "We 
think this is doable."
? The Republicans strongly oppose purchasing the transmission assets.
? Restore the invetor-owned utility model for generation.  They would 
establish a dedicated rate component for construction of native generation by 
the utilities.  They would grant ratepayers equity interest in these plants.
? Resolve the QFs' financial issues.

Assemblyman Cox commented afterward that the Republcans have been trying to 
work on a bilateral basis with the Democrats on these issues, but they feel 
"frozen out."  Moreover, he senses the Democrats moving back toward having an 
option to purchase SoCal's transmission assets, which the Republicans oppose.

Democratic Plan B
A source reports the following regarding the Democratic Plan B:
? The Democrats are formulating a Plan B that incorporates the Governor's 
MOU, the Nation Plan B and other ideas that they have.  This plan reportedly 
has not yet been introduced into the legislature yet because it is still 
being finalized and the Democrats are not certain that it will work.  
Specifically, the option to purchase SoCal's transmission assets is 
reportedly still being debated.  Some Democrats reportedly believe that this 
may be unnecessary.
? The details of the plan are reportedly as follows:
- Set aside the $3.1 bilion undercollect in a separate account funded by a 
dedicated rate  component.
- The generators can either get a check instantly from the bonds for 70% of 
their  claim or they can try to get up to 100% of their claim adjudicated 
through a  dispute.
- This plan could be used as a template for going to the bankruptcy judge to 
strike a deal  for PG&E.
? Sources indicate that the Democrats are developing a post-petition plan in 
cast SoCal files for bankruptcy, including the following:
- The state would buy both utilities out of bankruptcy.  It then would sell 
of pieces of  the utilities to various private-sector buyers, but with a 
lifetime stipulation on  how they will be run.
- Some Democrats reportedly believe the state could do this with as little as 
$5 billion if  it assumed the utilities' debt and got a cram-down by the 
bankrutpcy judge to quell  the protests against such a plan that would very 
likely erupt.  Democrats reportedly  believe that the Judge Montali would 
support this idea.