From: ron.coker@enron.com
To: louis.iaconetti@csfb.com
Cc: andrew.kelemen@enron.com, benjamin.rogers@enron.com, don.miller@enron.com
Date: 2000-09-26 12:23:00+00:00
Subject: Responses to PG&E Questions on Pastoria

I am working with Don Miller and will be responsible for receiving and 
processing all due diligence requests for Pastoria.  

Below are our responses to PG&E's questions:


QUESTION:Is the major maintenance reserve estimate based on a negotiated Long 
Term Services Agreement (LTSA)?  If so, will it be in place and transfer with 
PEF?

RESPONSE:  We have not negotiated an LTSA with anyone at this time, and we do 
not expect to have one in place to transfer with PEF.  The maintenance 
reserve is our estimate based on industry data and information from GE.


QUESTION: Are spare parts for the first major overhaul included anywhere in 
the capital cost estimate or are they assumed to be purchased through the 
maintenance reserve estimate (i.e. the LTSA) charge?

RESPONSE:  The maintenance reserve is intended to include parts and labor for 
the overhaul.


QUESTION: What is Enron's intent re: continuing involvement?  PG&E is 
concerned about any potential requirements that they might be required to 
either purchase fuel from Enron or engage Enron as the power marketer.

RESPONSE: Enron is very flexible re continuing involvement:  scheduling 
coordination, fuel supply, power marketing, etc.  We are also flexible re the 
time period and the terms of the continuing involvement.  Whatever 
arrangement is developed would be mutually beneficial.


QUESTION: What is status of EPC negotiations.  Will they be required to 
engage NEPCO as the EPC contractor?  Does the EPC contractor have control 
over the turbines?

RESPONSE: o EPC negotiations are complete with NEPCO.  Contract has not been 
executed, but has been "put on the shelf" awaiting decision on successful 
bidder for the purchase of the Pastoria project from ENA.  Successful bidder 
and NEPCO will each have the option of executing the EPC agreement.

  o The successful bidder will be under no obligation to engage NEPCO.

  o Pastoria has control of the turbines.  


QUESTION: They also questioned whether there would be any "agricultural
restrictions"?

RESPONSE: The project site is presently under a Williamson Act contract to 
maintain agricultural use in exchange for lower taxes.  Last week, the Kern 
County Board of Supervisors voted to cancel the Williamson Act contract to 
allow for industrial use, which started a 180-day public comment period.  
However, the Governor has on his desk a bill for signature that would reduce 
the public comment period for the cancellation to the same time frame as the 
request for rehearing period for the CEC Final Decision.  (The Governor has 
until 9/30 sign the bill and is expected to do so because of the overwhelming 
support of the bill in the Assembly and the Senate.)  The cancellation will 
be contingent upon a successful CEC decision and a payment of a Williamson 
Act cancellation fee.


QUESTION: I received a call from Tom Favinger at PG&E today.  He would like 
to get a breakout of the $10.25 million item in the Pastoria capital budget 
labeled Pre-Commercial Operations Costs.

RESPONSE: The breakdown (in $MM) is as follows:

Project management during construction  $1.000
Start-up and acceptance    2.900
Insurance and performance bond   1.846
Owner's Engineer     1.500
County Chief Building Officer/Engineer/Consultant 3.000

TOTAL      $10.246


Should you have any questions, please call me at 713.345.8992.