Re: DRAFT of materials for Governor ,
 4th set of suggestions from scott  You were missing answers to the other=20
questions.  Attached are the proposed answers.

Comments to Davis regarding some Speculated Solutions 1)

State could build generation:
The real issue is not who builds but that generation gets built in=20
California.=20
Any generation that is built in California will reduce problems because it=
=20
will displace load.  Displace load will cause lower demand which in turn wi=
ll=20
result in lower market prices (new supply/demand balance).
Our proposal, RFP of 10,000 MW, will allow all kinds of proposals including=
=20
ownership by government, to explore.
It is okay for the government to build generation but it should not result =
in=20
any different outcome than anyone else building.

Output of existing generation at cost
Output of existing utility generation should be sold at cost.
Utilities that caused the mess should not benefit.
All customers, including those being served by other suppliers,  paid for=
=20
these utilities when they were below market.  They should get their share o=
f=20
benefits of the existing assets now at cost.

Municipal utilities could be required to sell their excess generation in=20
California.
The problem we are incurring are related to government intervention (i.e.=
=20
price caps and illiquidity) causing uncertainty that causes California=20
utilities to desire to sell outside of the state.
Removal of price caps will keep municipal generation in the state.
There is no need to mandate that it stay within California.

State universities (including UC/CSU and the community colleges) would more=
=20
widely deploy distributed generation.
This solution is a great idea which is included in our pitch.
As indicated, we are advocating a CPUC process of RFP=01,s that would inclu=
de=20
universities.
This is a superior method because universities are slow to act and we need=
=20
solution by summer.


Expand in-state gas production.
No comment on this specific solution.  However, Enron notes that the QF=01,=
s=20
have rate that are linked to gas.  The Government should explore requiring=
=20
the QF=01,s to buy gas forward and sell at costs, for 5 to 20 years to lock=
 in=20
low costs.
The real issue related to gas is increasing gas capacity.  Any increase in=
=20
gas production in California or new pipeline into California would do much =
to=20
reduce electricity costs.  Governor Davis should ask the the California=20
Energy Commission to explore ways to increase gas supplies in much the same=
=20
manner suggested previously for electricity.

Take state lands gas royalties in kind.
No comment aside from above.

Negotiate directly with tribes and state governments in the west for=20
additional gas supplies.
No comment aside from above.

Empower an existing state agency to approve/coordinate power=20
plant=01;maintenance schedules to avoid having too much generation out of=
=20
service at any one time.
This solution should not be necessary if no entity holds too much market=20
power and entities are exposed to market price. They will seek to maintain=
=20
their assets such that they are available in high cost times.
Generators that are paid on a fixed price basis are at risk to doing bad=20
maintenance timing.
Thus, a committee to review maintenance timing of QF=01,s, utility owned=20
generation would be appropriate.

Condition emissions offsets on commitments to sell power longer term=01;in =
state.
The governor should not cause generation builders more risk.
What=01,s important is that generation be built in California, nothing else=
.
Any extra risk will cause less generation to be built.
Emission trading should be made right for all generation built in Californi=
a.

Condition new generation on a commitment to sell in state.
What=01,s important is that generation be built in California nothing else=
=20
Any extra risk will cause less generation to be built.=20


Securitize uncollected power purchase costs.=20
This is a great idea if made available to all customers.
We are suggesting that hedging be done through entities bidding on standard=
=20
offer, using the benefits of existing utility generation and securitization=
.
Utilities are not good at hedging so those that are good should bid on=20
default supplier status.
Allowing securitization of these hedging costs would allow lower rates whic=
h=20
is a good thing.

Either eliminate the ISO or sharply curtail its function -- he wants to hea=
r=20
more about how Nordpool works(Jeff- someone in Schroeder's group should be=
=20
able to help out here).
No comment.
---------------------- Forwarded by Scott Stoness/HOU/EES on 01/02/2001 07:=
20=20
PM ---------------------------


Scott Stoness
01/02/2001 07:20 PM
To: Jeff Dasovich/NA/Enron@Enron
cc: Marty Sunde/HOU/EES@EES, Dan Leff/HOU/EES@EES=20
Subject: Re: DRAFT of materials for Governor

3rd set of suggestions

We have missed the opportunity to make our points to i) share existing=20
generation, ii) treat all customers the same

Could we include the following:
Customers are continuously making decision related to who should provide th=
em=20
with service and whether they should relocate in California.
The current uncertainty around solvency of utilities and market price=20
exposure makes it difficult for customers to plan for the future.
Governor Davis is committed to:
No customer will incur rate increases above 10%.
All customers will have access to utility owned generation.
All customers, whether they be served by the utility or other supplier will=
=20
have equal opportunity to this commitment.=20
AB1890 will continue in place until the end of 2001, until and if some othe=
r=20
better plan is put in place.

We are also missing the opportunity to suggest auctioning of default=20
provider.:
The California Public Utility Commission, should immediately seek bids, in=
=20
the form of bids to take on portions of customers, to be selected on a rand=
om=20
basis, for standard offer, with commitments that such rates will not increa=
se=20
by more than 10% and will be available to all customers without notice or=
=20
penalty.



---------------------- Forwarded by Scott Stoness/HOU/EES on 01/02/2001 07:=
12=20
PM ---------------------------


Scott Stoness
01/02/2001 06:30 PM
To: Jeff Dasovich/NA/Enron@Enron
cc: Marty Sunde/HOU/EES@EES, Dan Leff/HOU/EES@EES, Don Black=20
Subject: Re: DRAFT of materials for Governor

2nd Comments:

 We are missing in Increasing Supply section
running of existing older generation combined with mitigating reductions in=
=20
emissions. =20
missing Concrete suggestions:=20
California Energy Commission sponsored process to determine and implement=
=20
actions that will:
result in 10,000 MW of new energy efficient generation being built within=
=20
California within 2002; and=20
running of existing older generation combined with mitigating reductions in=
=20
emissions

 We are missing in decreasing load section
missing concrete suggestions:=20
The California Public Utility Commission, will immediately seek bids, in th=
e=20
form of rate changes and regulatory commitments that would result in 2,000 =
MW=20
of reduced on peak load by June 1, 2001
The California Public Utility Commission, will immediately seek bids, in th=
e=20
form of rate changes and regulatory commitments that would result in 5,000 =
MW=20
of reduced overall load by January 1, 2002.

---------------------- Forwarded by Scott Stoness/HOU/EES on 01/02/2001 06:=
18=20
PM ---------------------------


Scott Stoness
01/02/2001 06:18 PM
To: Jeff Dasovich/Na/Enron@ENRON
cc: Marty Sunde/HOU/EES@EES, Dan Leff/HOU/EES@EES, Don Black=20
Subject: Re: DRAFT of materials for Governor =20

1st Comments from Scott

We are missing:

Positive spin at front
Governor Davis is committed to solving the California energy crisis by:
Developing consumer driven solutions
Protecting customers from short term market aberrations
Continuing to expand the consumers ability to choose
We are missing thoughtful Orderly Process
Maintain 1890 in interim
All customers treated the same
Would replace "maintain a reliable distribution network" with "assure=20
investment community"
Assurances around forward purchases
Assurances around prudent purchases to keep lights
Assurances, if needed through increases, via tax refundable.
Maintain AB1890 until orderly process arrives with better solution
Would drop specifics arount rate increase.=20

More to come......
jeff.dasovich@enron.com