California Update 6/25/01 ,
 EXECUTIVE SUMMARY
? California Budget Resolved
? FERC Ordered Energy Settlements Stall MOU/Plan B 

BUDGET
California legislators in the House have once again established a tentative 
reserve amount for the state's depleted budget.  Both sides are reportedly 
uneasy with the $2.74B compromise and sources indicate that the four 
Republican votes needed to pass the budget  in the Assembly are likely far 
more obtainable than the one Republican vote needed in the Senate.  
California's current redistricting process may provide Republicans with 
future seats that could translate into immediate bargaining power in energy 
and budget matters.  Adding to the frustration, sources indicate that 
consumer activist Harvey Rosenfield plans to pressure State  Treasurer 
Angelides into battling with legislators for progress on the budget and 
revenue bonds.

ENERGY SETTLEMENTS
Today marked opening negotiations for California state energy officials and 
the several large energy providers who are charged with price gouging 
Californians.  Sources close to California State Sen. Burton report that the 
results from the15 days of negotiations before the FERC appointed 
Administrative Law Judge, Curtis Wagener, will significantly influence the 
state's efforts in promoting any Plan B or MOU.  Burton indicated that FERC 
would need to order between $3 and $4B in generator refunds before the state 
would finalize a SoCal bail-out.  Of that amount, SoCal would most likely be 
infused with $1B, however, without substantial contributions from power 
providers that sold into California and currently fall outside FERC's 
jurisdiction (i.e. BC Hydro & LA DWP), a $3 to $5B refund would be impossible 
to achieve.  Regardless of legislators' desires, sources believe that  
consistent with the PG&E bankruptcy advisor's view, a multibillion dollar 
refund from FERC is unlikely.  Sources will continue to monitor and report on 
these negotiations.
john.lavorato@enron.com, louise.kitchen@enron.com, david.delainey@enron.com