RE: Enron's Advocacy in California ,
 Jim,

We can talk at greater length if you want, but the quick answers to your questions are:

1. PX Credit: Make it simple and transparent.  Best outcome would be no credit -- DA pays T&D costs only, as they appear in the tariff.  Period, end of story.
2. The UDC Financial Hole: The more relief we can get from these items, the better.  Duh.  The small surcharge ($10) is currently factored into in our curves, so the hope is that whatever ultimately emerges from the sausage factory, the ultimate amount that they try to stick on DA customers is < $10.  If our contract language ends up protecting us further, all the better, but I would prefer that not to be our last resort.


>  -----Original Message-----
> From: 	Steffes, James D.  
> Sent:	Tuesday, October 09, 2001 7:43 PM
> To:	Swain, Steve; Tribolet, Michael; Dasovich, Jeff
> Subject:	Enron's Advocacy in California
> 
> Steve --
> 
> As you can see from the e-mail chain, we are now at a 
> decision point on where we want to go with PG&E and SCE.  
> With the progress of the PG&E bankruptcy and the SCE 
> Settlement with the CPUC, it is important that we are all on 
> the same page.  
> 
> Basically we need to make sure that our advocacy is 
> consistent with our expected outcomes at the CPUC and with 
> the nature of your business (both current and hopefully going 
> forward).
> 
> 1.	Do you have a preferred outcome on the PX Credit mechanism? 
> 2.	Our advocacy on allocation of Utility Undercollection, 
> CDWR long-term contracts, and Bonds to pay off CDWR current 
> costs is that if a customer never was on DA they should be 
> "free" of all of these costs.  Following from that logic, we 
> want to argue that customers who cause these buckets of costs 
> for limited periods of time should only pay for those 
> periods.  We need to discuss the probable outcome of the 
> assignment of these costs and Bob Williams' ideas on the 
> "tax" passthru.  
> 
> I have attached Mike Smith's matrix on the outcome for each 
> bucket of $$.  
> 
> Let's talk very soon.  We are potentially moving forward with 
> a SCE strategy.
> 
> Jim
> 
>  << File: CA Surcharge Matrix 10-09.doc >> 
> 
> 
> 
>  -----Original Message-----
> From: 	Steffes, James D.  
> Sent:	Tuesday, October 09, 2001 7:00 PM
> To:	Williams, Robert C.; Dasovich, Jeff; Mara, Susan; Wu, 
> Andrew; Smith, Mike; Sanders, Richard B.
> Subject:	RE: $.01 surcharge as "tax"
> 
> The EWS West Power URM desk will need to determine the $$ at 
> stake and help us manage our financial exposure and the 
> appropriate policy response.  It's their $$.  So far, my 
> understanding from the desk is that our current policy 
> recommendations (as outlined in the Mike Smith memo) are the 
> "preferred" outcome - I'll reconfirm.
> 
> Jim
> 
>  -----Original Message-----
> From: 	Williams, Robert C.  
> Sent:	Tuesday, October 09, 2001 5:25 PM
> To:	Dasovich, Jeff; Mara, Susan; 'mday@gmssr.com'; Steffes, 
> James D.; Wu, Andrew; Smith, Mike
> Subject:	RE: $.01 surcharge as "tax"
> 
> We could not do that.  On the other hand, if we advocate that 
> it should only apply to those who directly benefitted, and 
> the CPUC adopts that reasoning, we would be shooting our tax 
> argument in the foot.  I think you are right that we need to 
> understand the implications, both financially and 
> contractually, of the options before the Commission.  
> 
>  -----Original Message-----
> From: 	Dasovich, Jeff  
> Sent:	Tuesday, October 09, 2001 5:20 PM
> To:	Williams, Robert C.; Mara, Susan; 'mday@gmssr.com'; 
> Steffes, James D.; Wu, Andrew; Smith, Mike
> Subject:	RE: $.01 surcharge as "tax"
> 
> Thanks.  One other question, which seems like a legal 
> question.  Assume that Enron openly advocates for the PUC to 
> apply the charges to all customers, including ours, 
> understanding that our customers neither benefited from or 
> caused the charges.  If the PUC does it, and we go back to 
> our customers and claim that an indirect tax has been 
> applied, are we in any kind of bind for having pushed for it? 
>  I'm hoping that the answer is no.  Thanks for the info.
> 
> Best,
> Jeff
> 
>  -----Original Message-----
> From: 	Williams, Robert C.  
> Sent:	Tuesday, October 09, 2001 5:11 PM
> To:	Dasovich, Jeff; Mara, Susan; 'mday@gmssr.com'; Steffes, 
> James D.; Wu, Andrew; Smith, Mike
> Subject:	FW: $.01 surcharge as "tax"
> 
> a legal memo follows
> 
>  -----Original Message-----
> From: 	Williams, Robert C.  
> Sent:	Thursday, August 02, 2001 9:16 AM
> To:	Mellencamp, Lisa; 'jklauber@llgm.com'
> Subject:	FW: $.01 surcharge as "tax"
> 
> 
> 
>  -----Original Message-----
> From: 	Williams, Robert C.  
> Sent:	Friday, July 27, 2001 5:47 PM
> To:	Sharp, Vicki
> Subject:	$.01 surcharge as "tax"
> 
> A typical clause reads as follows:
> 
> " 'Taxes' means any and all new or existing governmental or 
> quasi-governmental taxes, assessments, levies, duties, fees, 
> charges and withholdings of any kind or nature whatsoever and 
> howsoever described, including gross receipts, franchise, 
> sales, use , property, excise, capital, stamp, transfer, 
> employment, occupation, generatiion, privilege, Utility Taxes 
> [separately defined to include "any and all franchise, 
> utility, regulatory, BTU or energy, gross receipts, 
> administrative services, municipality, and utility user taxes 
> and similar taxes and energy resource and municipal land use 
> surcharges and other similar surcharges"], regulatory, BTU, 
> energy, consumption, lease, transaction, license, filing, 
> recording, and activity taxes, levies, duties, fees, charges 
> and withholdings, together with any and all penalties, fines, 
> interest, and additions thereto, but excluding any taxes on 
> the net income of EESI or any affilitates."
> 
> Under the contracts the Buyer is usually responsible for 
> taxes "applicable to Power at or after the Delivery Point" 
> (the meter); the Seller is usually responsible for taxes 
> "applicable prior to the Delivery Point."  The surcharge 
> would seem to be applicable "at the Delivery Point."
> 
> Support for the argument that the surcharge is not a "tax" 
> under the contracts:
> 
>      1.  The CPUC refers to it as a "rate increase"
> 
>      2.  It was not imposed by a governmental body (such as a 
> state, county, or municipality)
> 
>      3.  When first implemented, all proceeds went to the utilities
> 
>      4.  It appears that a portion of the proceeds may 
> continue to go to the utilities
> 
> Support for the argument that the surcharge is a "tax" under 
> the contracts:
> 
>      1.  Since the "frozen tariff" remains in place it is 
> disingenuous to refer to it as a "rate increase"
> 
>      2.  It now appears that the proceeds will go to a 
> governmental entity, the DWR
> 
>      3.  The definition of "taxes" under the contract is 
> broad and includes surcharges of all types
> 
>      4.  To the extent the $.01 surcharge is to pay for 
> generation for bundled customers, those on direct access 
> receive, if anything, only an indirect benefit, which is 
> similar in effect to a tax and not to a rate increase
d..steffes@enron.com, michael.tribolet@enron.com, jeff.dasovich@enron.com