Message-ID: <11136309.1075860377565.JavaMail.evans@thyme>
Date: Fri, 12 Jan 2001 02:11:00 -0800 (PST)
From: mary.hain@enron.com
To: tim.belden@enron.com
Subject: Re: Financial Analysis of PG&E and Proposed Terms for Settlement
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Is EES asking for too much here (especially extending the rate freeze)? =20
Wouldn't it be better to get this thing resolved (assuming that's possible)=
?
---------------------- Forwarded by Mary Hain/HOU/ECT on 01/12/2001 10:14 A=
M=20
---------------------------


Scott Stoness@EES
01/12/2001 07:12 AM
To: James D Steffes/NA/Enron@ENRON
cc: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Mark=20
Palmer/Corp/Enron@ENRON, Michael Tribolet/Corp/Enron@Enron, Harry=20
Kingerski/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Susan J=20
Mara/NA/Enron@ENRON, Joe Hartsoe/Corp/Enron@ENRON, Sarah=20
Novosel/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON, Alan=20
Comnes/PDX/ECT@ECT@ENRON, Mary Hain/HOU/ECT@ECT@ENRON, Paul=20
Kaufman/PDX/ECT@ECT@ENRON, Sandra McCubbin/NA/Enron@Enron, Roger=20
Yang/SFO/EES@EES, Robert Badeer/HOU/ECT@ECT@ENRON, Tim=20
Belden/HOU/ECT@ECT@ENRON, Stephen Swain/PDX/ECT@ECT@ENRON, Travis=20
McCullough/HOU/ECT@ECT@ENRON, Andre=20
Cangucu/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT@ENRON, Shelia=20
Benke/Corp/Enron@Enron, Vicki Sharp/HOU/EES@EES, Wanda Curry/HOU/EES@EES, D=
on=20
Black/HOU/EES@EES, Gordon Savage/HOU/EES@EES, Donna Fulton/Corp/Enron@ENRON=
,=20
William S Bradford/HOU/ECT@ECT@ENRON=20
Subject: Re: Financial Analysis of PG&E and Proposed Terms for Settlement =
=20

Jim.  I like your suggestions and suggest the following enhancements:
We should integrate this solution into the CPUC process. ie Keep rate freez=
e=20
in effect until the Mar 02.  Make state agency take over as ESP to all=20
bundled customers at 110% of frozen rate.  This solution keeps the current=
=20
Rate Freeze in place and keeps us in the game to not lose our negative ctc.=
 =20
It also corresponds to your minimal changes goal.  It also puts government=
=20
agency in the same place as us in having exposure to negative ctc as us.  I=
t=20
also accomodates the problem of RFP's taking longer than expected.  It also=
=20
solves the liquidity problem immediately and avoids the need for=20
forbearance.  And furthermore it keeps the utility exposed to bankruptcy=20
which minimizes their negotiating power.
I don't understand how this proposal addreses what happens with the existin=
g=20
assets of PG&E.  The worry I have is that PG&E gets to keep 50% of the=20
benefits of nuclear sales and 10% of the benefits of hydro sales, post rate=
=20
freeze.  If we damage 1890, the utilities are now in the drivers seat.
re "ESPs should be able to buy from UDCs at the current weighted average=20
generation rate from 1/1/01 =01) 12/31/02 to serve any competitive load in=
=20
California"  This suggest a replacement to AB 1890 which suggests significa=
nt=20
changes.  Would it not be better to say "After the rate freeze, the=20
government entity would take over the obligations of PG&E and continue them=
=20
to the end of 2002.  Such assumption and continuation, would be combined wi=
th=20
the government entity recieving the benefits of  the difference between=20
market prices and embedded costs of the SCE/PG&E existing generation assets=
.

Summary of Solution that incorporates these suggestions
Government entity becomes an ESP taking over all customers not served by=20
another ESP.
Government accepts any ESP's that come back within 3 weeks.
Utilities stopped from selling any additional nuclear, hydro, thermal or QF=
=20
generation. (requires change in legislation)
Utilities provide surcharge/credit, for the lessor of 40 years or retiremen=
t,=20
based on the difference between generation COS and market value to all ESPs=
,=20
after rate freeze ends (requires change in legislation and settlement).
Government entity, as ESP,  charges Frozen Rate plus 10% until the end of=
=20
2002.
Government entity, assures all ESP that they will their costs will not exce=
ed=20
110% of frozen rate until the end of 2002.
Rate freeze and surcharge continue until the end of March 2002.
Any shortfall of agency would be recovered through a amortization over the=
=20
next 15 years with securitization less positive proceeds from auctioning=20
default provider. (requires change in legislation)
Government commit to building 10,000 MW of generation by summer of 2002
Government commit to allowing emmission constrainted generators to buy=20
emission credits
Goverment change legislation to allow swift DSM activity



From: James D Steffes@ENRON on 01/11/2001 10:42 PM
To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Mark=20
Palmer/Corp/Enron@ENRON, Michael Tribolet/Corp/Enron@Enron, Harry=20
Kingerski/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Susan J=20
Mara/NA/Enron@ENRON, Joe Hartsoe/Corp/Enron@ENRON, Sarah=20
Novosel/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON, Alan=20
Comnes/PDX/ECT@ECT, Mary Hain/HOU/ECT@ECT, Paul Kaufman/PDX/ECT@ECT, Sandra=
=20
McCubbin/NA/Enron@Enron, Roger Yang/SFO/EES@EES, Scott Stoness/HOU/EES@EES,=
=20
Robert Badeer/HOU/ECT@ECT, Tim Belden/HOU/ECT@ECT, Stephen Swain/PDX/ECT@EC=
T,=20
Travis McCullough/HOU/ECT@ECT, Andre=20
Cangucu/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Shelia Benke/Corp/Enron@Enron,=
=20
Vicki Sharp/HOU/EES@EES, Wanda Curry/HOU/EES@EES, Don Black/HOU/EES@EES,=20
Gordon Savage/HOU/EES@EES, Donna Fulton/Corp/Enron@ENRON, William S=20
Bradford/HOU/ECT@ECT
cc: =20
Subject: Financial Analysis of PG&E and Proposed Terms for Settlement

Attached please find three documents that outlines the economics of LT=20
contracting necessary for PG&E and SCE.  Also find some thoughts on element=
s=20
of a workable settlement.

Call me with any questions.

Jim






Scott Stoness
01/11/2001 05:09 PM
To: James D Steffes/NA/Enron@ENRON
cc: Don Black/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron=20
Subject: Re: Treasury (keep PG&E) Solvent Strategy =20

Great idea.  My strategy was solve the immediate problem of solvency quickl=
y=20
by getting the government to step in while the rules of the RFP are defined=
,=20
then do the auction, but if you think we could go straight to an RFP for=20
standard offer without going bankrupt, I would be for it.

I believe that we do not have time for an RFP (6 months) so that we should=
=20
get the government entity to step in to give us the time.

And auction by rate class would be good but noone would want the large=20
classes because their rate increase will be higher and they will be less=20
likely to stay.

Scott


From: James D Steffes@ENRON on 01/11/2001 03:25 PM
To: Scott Stoness/HOU/EES@EES
cc: Don Black/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron=20
Subject: Re: Treasury (keep PG&E) Solvent Strategy =20

What about something different?

If we asked for an Auction by rate class that would allow a different compa=
ny=20
to market the default service.  The competitive bids would be used to reduc=
e=20
the overall undercollection.  So in your ST point #1, replace Government=20
entity with a Competitive ESP that has paid the most to win that right.

Jim




=09Scott Stoness@EES
=0901/11/2001 02:39 PM
=09=09=20
=09=09 To: James D Steffes/NA/Enron@Enron
=09=09 cc: Harry Kingerski/NA/Enron@Enron, Don Black
=09=09 Subject: Treasury (keep PG&E) Solvent Strategy

Solution
Government entity becomes an ESP taking over all customers not served by=20
another ESP.
Government accepts any ESP's that come back within 3 weeks
Utilities stopped from selling any additional nuclear, hydro, thermal or QF=
=20
generation.
Utilities provide surcharge/credit, for the lessor of 40 years or retiremen=
t,=20
based on the difference between generation COS and market value to all ESPs=
,=20
after rate freeze ends.
Government entity, as ESP,  charges Frozen Rate plus 10% until the end of=
=20
2002.
Government entity, assures all ESP that they will their costs will not exce=
ed=20
110% of frozen rate until the end of 2002.
Rate freeze and surcharge continue until the end of March 2002.
Any shortfall of agency would be recovered through a amortization over the=
=20
next 15 years with securitization less positive proceeds from auctioning=20
default provider.

Other:
Government commit to building 10,000 MW of generation by summer of 2002
Government commit to allowing emmission constrainted generators to buy=20
emission credits
Goverment change legislation to allow swift DSM activity


