From: c..williams@enron.com
To: d..steffes@enron.com, jeff.dasovich@enron.com, susan.mara@enron.com, andrew.wu@enron.com, mike.smith@enron.com, b..sanders@enron.com
Date: 2001-10-10 13:31:23+00:00
Subject: DWR Charges as "Tax"

The choice is between locking in our exposure to our customers at four months versus risking exposure for the full period of time but with an argument that this is either a "tax" or an "indirect" consequence of our re-sourcing them to the utilities.

 -----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