Chris & Jeff --

Given your pending discussions, thought you should see this information.  Not 
quite sure what SDG&E is up to here, but wanted you to be aware.  Jeff, don't 
know what Mona is thinking about doing, but you may want to talk with her 
about responses.

Jim


----- Forwarded by James D Steffes/NA/Enron on 10/09/2000 03:29 PM -----

	Mona L Petrochko@EES
	10/09/2000 02:59 PM
		
		 To: Gary Mirich/HOU/EES@EES
		 cc: Douglas Condon/SFO/EES@EES, Martin Wenzel/SFO/HOU/EES@EES, West GA, 
Harry Kingerski@EES, James D Steffes/NA/Enron@Enron, Joe Hartsoe@Enron
		 Subject: Re: SDGE represenatation of future market conditions

Gary,

Thanks for passing this information along.  This is a pretty well-documented 
discussion, which is always helpful when we contact the utility about such 
conduct.

Obviously, this is very concerning about SDG&E counter-marketing, while 
promoting choice.  In addition some of their assumptions seem to require 
tremendous leaps of faith.

I haven't seen an application to aggregate yet, but I would assume there 
would be heavy protests to such a proposal.  (SDG&E solicited my feedback on 
such a position, and I told them we weren't interested.)

I'm not sure what type of ruling they are expecting from FERC, lower price 
caps or a return to cost-based rates (pretty extreme).  Decision, per Sue 
Mara, is not expected until December.

SDG&E does have bilateral contracting authority and at least thus far has not 
exercised it.  

Customers have already experienced what "leaving it to SDG&E" will get them.  
Once bitten, twice shy.

  



	Enron Energy Services
	
	From:  Gary Mirich                           10/09/2000 12:03 PM
	Phone No: 602-840-3800
	



To: Mona L Petrochko/SFO/EES@EES
cc: Douglas Condon/SFO/EES@EES, Martin Wenzel/SFO/HOU/EES 
Subject: SDGE represenatation of future market conditions

Mona, I thought you should have the following information due to your ongoing 
work with SDGE to
facilitate open market choice by their regulated customers.

As you know I've been working with SAIC to close business for the last 60 
days. We had
offered them a 26 month price on 50% of their load for approximately 7.5 
cents/kWh. They compared
our offer(s) to others that were significantly higher.  As part of their 
decision-making process, and in an 
attempt to confirm that SDGE wasn't preparing to release any kind of drastic 
rate reduction/relief in the
immediate future, SAIC's treasurer called SDGE's CEO for a meeting with an 
SDGE exec.

On 9/27, SAIC's treasurer Dan Baldwin met with SDGE's SVP of Fuels and Power 
Ops, Gary Cotton. Another
SAIC exec, Rene Terrazas, VP Real Estate, was also in that meeting. He is my 
source for the following
comments from SDGE:

1).  SDGE expects to be given authority very soon to aggregate customers, 
much like direct access
providers, in order to provide better-than-market pricing.

2). SDGE expects FERC to "come out with something" that will reduce the 
prices that retail standard
offer customers are paying. No detail from SDGE on what form FERC's action 
would take or when.

3). SDGE's recent bilateral contracting authority should result in lower 
prices for SAIC.

4). SDGE suggested that very few customers have switched to DA because their 
is too much 
uncertainty about the future.  He said that SAIC is part of 97% of SDGE's 
customers that have
not switched to date.

5). This SDGE exec said he thought that prices would soon return to a more 
reasonable
level, and that SAIC should be expecting direct access prices around 5 
cents/kWh.

Even though SAIC currently suffers from analysis-paralysis, SDGE's comments 
about the state of the market
are very concerning.  First, pawning off SAIC to an exec in fuels and ops for 
advise about the retail open
market hardly seems appropriate.  Second, SDGE's suggestion to SAIC that they 
are somehow in good
company by waiting is directly in contrast to what SDGE's regulatory affairs 
people are attempting to
promote with the supplier selection initiative.

Third, for SDGE to even hint that there are regulatory (FERC, CPUC, or 
otherwise) "fixes" soon to be
announced that will relieve SAIC's pricing dilema is at the very least 
irresponsible.  In Rene's opinion
the SDGE exec was using the same old "fear, uncertainty, and doubt" lines 
that utility execs typically
employed prior to direct access in their efforts to retain customers!

Finally, and most concerning to me, is that SDGE has an executive willing to 
make a guess about the
price SAIC should be expecting to receive in this market.  Many market 
sources (eg: Bloomberg) besides
Enron wouldn't predict a price as low as 5 cents. Nevermind that Mr. Cotton 
is likely unqualified to make
such a claim, but even if he was, I think he is way off base for even 
entertaining the question.  

In light of our efforts to work with SDGE to facilitate customer transition 
to DA, I think these comments 
indicate that their executive team is not truly on board with the work of 
SDGE's regulatory affairs.  EES is
in a "stand down" right now with SAIC, who decided after their meeting with 
SDGE that Enron's offer
may not be as competitive as previously believed.  Their treasurer has 
decided to wait and see - perhaps
a month or more.  

Irrespective of my ability to close this deal today or in the future, I 
wanted you to be aware
of the SDGE's comments and how they've impacted one SDGE customer's decision 
to "leave the utility".
Perhaps we should suggest that customer inquiries like those of SAIC go 
through regulatory affairs 
instead of execs who have twisted and/or minimal information and a 
willingness to guess about the future.

Your comments welcome.
thanks much
Gary.