From: karen.denne@enron.com
To: jeff.dasovich@enron.com, susan.mara@enron.com, harry.kingerski@enron.com, janel.guerrero@enron.com, richard.shapiro@enron.com, steven.kean@enron.com, james.steffes@enron.com
Date: 2001-07-31 18:00:00+00:00
Subject: FW: Loretta Lynch at Town Hall

FYI... Marathon attended the Town Hall session last week with Loretta Lynch...

 -----Original Message-----
From:  Sandra Yamane <SYamane@marathon-com.com>@ENRON 
[mailto:IMCEANOTES-Sandra+20Yamane+20+3CSYamane+40marathon-com+2Ecom+3E+40ENRO
N@ENRON.com] 
Sent: Thursday, July 26, 2001 5:07 PM
To: Denne, Karen
Subject: Loretta Lynch at Town Hall

Loretta Lynch today addressed Town Hall Los Angeles.  Approximately 120
people were in attendance.

Before her remarks, it was announced that Ken Lay had postponed his Town
Hall engagement.  Adrienne Medawar (Town Hall President) said she was very
disappointed but that Mr. Lay was committed to rescheduling at a later date.

Lynch provided a brief overview of electricity regulation in California and
the Federal Power Act.

After denouncing the "blame game" and stating that she had been on the
receiving end of a coordinated attempt to assign blame, Lynch proceeded to
place blame on former Gov. Wilson, the 1996 legislature that adopted AB
1890, FERC, and merchant generators and sellers.

Lynch discussed 5 myths of deregulation:

#1.  California deregulated its system in 1996.  Lynch stated that
California did not deregulate, rather that California federalized
electricity prices.  Despite market manipulation, FERC failed to enforce the
law.  This resulted in the largest transfer of wealth in US history.

#2.  California's problem is simply a lack of supply.  Lynch showed charts
depicting the amount of supply off-line last December.

#3.  Long term contracts would have solved the problem. The facts prove this
wrong.  Since Jan. 2000, only 10 requests were made for contract authority.
Rushing to long-term contracting could prove to be quite costly. Over
contracting may lead to excess supply.  Forward contracting also prohibits
initiatives such as direct access.

#4.  Early rate increases would have solved the problem.  The PUC raised
rates when it was demonstrated that it was necessary and did so within 90
days.

#5  Sellers will exercise self control.  All evidence points to the
contrary.  California deregulation was designed in speculator's interest.
Prices went down only because of FERC action.  High prices demonstrate the
need for government regulation in cartel situation.

Lynch offered the following suggestions to fix and improve the current
situation:

1.  Expand renewable energy and energy efficiency
2.  Forge a relationship with the "new" FERC
3.  Hold those who broke the rules accountable
4.  Make sure there is adequate supply at reasonable prices

Questions from audience:
Is it true that DWR will be able to set rates?  Yes, AB1X transferred PUC's
role of evaluating reasonableness to the DWR.  PUC cannot disallow pass
through of costs.

Will state intervention remove incentive of private business to invest in
California's electricity market?  No.  The facts bear that theory out as a
red herring.  Even with $250 price cap in place, many companies applied for
permits to build power plants.

What legal recourse do we have?  PUC has joined with the Attorney General to
investigate generators and sellers. "I believe they stepped over the line.
They were sloppy about it."  We've been thwarted by confidentiality
agreements, but justice will prevail.