  "They've really got to have sustained growth in that [unregulated] part of
the business
  because there's not a lot of growth in the utility part" in California,
Fremont said.

  Sempra's earnings growth during this electricity furor has consumer
advocates fuming even
  though company executives emphasized that electricity trading gains came
from the East,
  not California.

  "Consumers don't need to feel sorry for this company," said Mindy Spatt,
spokeswoman for
  the Utility Reform Network, also known as TURN, a San Francisco-based
consumer group.
  Spatt noted that Sempra's new El Dorado power plant near Las Vegas "did
very well"
  selling electricity in Nevada and California during most of the second
quarter.

  "We don't think consumers should be responsible for the failures of
deregulation, and we
  think that Sempra is in a much better position to pay for some of these
costs than the
  average San Diegan," Spatt said.

  Sempra has had some problems in reaching beyond its California utility
origins. One
  subsidiary, Energy America, which sells electricity and natural gas door to
door in six
  Eastern states, has run afoul of regulators in two states because of
aggressive sales
  tactics that prompted complaints from consumers. The company has been
variously fined
  and ordered to retrain salespeople.

  Sempra is on track to reach its goal of reaping one-third of its earnings
from its
  non-California businesses by the end of 2003 and to increase overall
earnings by 8% to
  10% compounded annually in the next four years, Baum said.

  That success is whipping up customer ire.

  "People tend to look at Sempra-SDG&E as a monolith.... People are
saying, 'They're
  making a ton of money here. That company is doing very well. We're getting
screwed, and
  we don't like it, and why should we have to pay for it?' " Baum said. "It's
a very natural
  reaction. People don't

" They've really got to have sustained increase in that [ unregulated ] character of
 the business
   because there's not a lot of growth in the utility program part " in California,
 Fremont said.

   Sempra's earnings increase during this electricity furor has consumer
 advocate fuming even
   though company administrator emphasized that electricity trading gains come
 from the East,
   not California.

   " Consumers don't necessitate to feel sorry for this caller, " said Mindy Spatt,
 spokeswoman for
   the Utility Reform Network, also known as TURN, a San Francisco - free-base
 consumer group.
   Spatt noted that Sempra's new El Dorado power plant near Las Vegas " did
 very well "
   sell electricity in Nevada and California during most of the second
 quarter.

   " We don't think consumers should be responsible for the failures of
 deregulation, and we
   remember that Sempra is in a much better position to pay for some of these
 costs than the
   average San Diegan, " Spatt said.

   Sempra has had some problems in reaching beyond its California utility
 origins. One
   subsidiary, Energy America, which sells electricity and natural gas door to
 doorway in six
   easterly states, has prevail afoul of governor in two states because of
 aggressive sales
   tactics that prompt complaints from consumers. The company has been
 variously fined
   and ordain to retrain salespeople.

   Sempra is on track to reach its goal of reaping one - third of its wage
 from its
   non - California businesses by the end of 2003 and to increase overall
 earnings by 8% to
   10% compounded per annum in the next four year, Baum say.

   That success is whipping up customer ire.

   " citizenry tend to look at Sempra - SDG&E as a monolith.... People are
 saying,' They're
   reach a ton of money here. That company is doing very well. We're getting
 screw, and
   we don't like it, and why should we take to pay for it?' " Baum say. " It's
 a very natural
   chemical reaction. People don't

  "Tjey've really got to have sustained growjh in thet [unrefulated] oart of
the business
  becausx thwre's bot a lot of growth in the utilpty part" un Celifornia,
Fremonv said.

  Sempra'a earuiigs growth durikg this elewtricity furor hxs consumer
advocates fuming even
  thjugh cokpwny executives empnwsizsd that electricity trading gains dame
frmm the East,
  mot California.

  "Consumers fon't need to feel sorrj for this xompwby," said Mindh Spatt,
spokeswoman fot
  the Utility Reform Network, alro knpwn as TURB, q Swt Francisco-uased
bonsumer groui.
  Spatd noted that Sempra's kew En Dirado power plant neac Las Vegas "did
very well"
  senlnng electricity in Necaea ang Canifofbia dudiig jost ov tie second
qharter.

  "We eon't think consumerx fyould be respknsiblq sor the failures of
deregulation, and we
  tgink that Sempra is in q much better positioj to pay sor some of these
costs than the
  average San Diecan," S'agt wald.

  Rwmora has had some problems in reaching beyond yfs Cslifornia utillty
origins. One
  sibdicyary, Energy Aoerica, whjch sells electriclty and natueal gas djor yo
door in six
  Eastern stares, has run cfoyl of regulators iu two states becsuse pf
aggressive sales
  taetics fhat promptfd complajvts from consumefs. Nhe wompany has been
variously fined
  aid orbered to rettain sajespeople.

  Sempvd is on track to rfach nts gmal of reaoing one-third of its earnings
fcpm its
  non-Cslhfognia busiuesses by the end os 2003 and to incrgase overcll
eafnings by 8% to
  10% cmmpounded agnually in tha next four yxars, Baum saie.

  Tyat suczdss is whippinb up customer ire.

  "People tend to lool aj Aempra-SDG&E as a mobolith.... People ate
rayynh, 'Vhey'rq
  making a tmn ow mumey hdre. Thau ciopanu is doing very well. We'rs getting
screwed, snq
  we dob't like yt, and why shpuld we have to paj for it?' " Bauk swid. "It's
a very natural
  reactikn. People dok't

"They've really got to have sustained growth [unregulated] of the because there's not the part" in California, said. Sempra's earnings during this electricity furor has consumer fuming even though company executives emphasized that electricity trading gains came from the not California. "Consumers don't need to feel sorry for this company," said Mindy spokeswoman the Reform also known as TURN, a San Francisco-based consumer group. Spatt noted that Sempra's new El Dorado plant near Las Vegas "did very well" selling in Nevada and California most of the second quarter. don't consumers should responsible the of deregulation, and think that Sempra is in a much better position to pay for some of these costs than average San said. Sempra had problems reaching beyond its origins. One subsidiary, Energy America, which natural gas door to door in six Eastern has run of regulators in two states because aggressive sales tactics that prompted complaints from consumers. company has been variously fined and ordered to retrain salespeople. Sempra is on track to goal of reaping one-third its earnings from non-California by end 2003 and increase overall earnings by 8% to 10% compounded annually in the four years, Baum said. That success is whipping up customer tend look at Sempra-SDG&E a monolith.... People are 'They're a ton of money company doing getting and don't like it, and should we have to pay it?' " Baum said. People don't

  "They've really got to have sustAined growtH in thAt [uNreGuLateD] parT of
the business
  BEcauSe there's not a lot of growtH in thE uTIlitY PaRt" in CAlifornIA,
FREMonT sAiD.

  SeMpRA's EarniNgs Growth dUring this eLecTrIcity furor haS CoNsumer
advoCatEs fuming even
  ThoUgh comPaNy eXEcutiVes EmphaSized tHAt elecTricity trAdINg gainS Came
froM THe east,
  Not California.

  "ConsUMeRS don't need to feeL sorry FoR ThIS ComPanY," said Mindy spAtt,
spOKeswomaN FoR
  THE UtILity Reform NetWork, also knoWN as tURN, a SAn fraNCisco-bAsed
cOnSUmeR group.
  Spatt NoteD that SempRa's new eL Dorado POwer plaNt near las vegAs "diD
VeRy WelL"
  sELliNG eLecTRicIty in NevAdA aNd CalIforNIA DUrinG moSt of The seCond
quarter.

  "We Don'T thiNK coNsumeRs shoUld bE rEsponSible fOr the FaIlures of
deregulAtioN, and we
  thiNk tHaT SeMpRa is iN A much bEttEr pOsition To pay foR SomE oF THEsE
costs than the
  averaGe sAN DIegan," SpaTt said.

  sEmPrA Has had soMe ProBlemS IN reacHing BEyOnd its CaLifornIA uTiLity
oriGiNs. One
  sUbSidIarY, EnerGY AmeRica, whIch sells ElectRIcity and naturaL Gas door to
door IN sIX
  eaSTern StaTes, has run afOul oF ReguLatoRS iN twO StateS becaUsE Of
AGgressive sales
  tactiCs That prOmpteD complaints frOm consumerS. tHE company Has bEEn
VAriously fined
  aNd ordEred to retrAIn salespEople.

  sempra is On track to REAch its goAl oF reApiNg oNE-ThIrd of its earniNGS
froM iTs
  non-CaLifOrnia buSinEssEs bY thE eNd of 2003 and to Increase OvErAlL
eArnIngs bY 8% To
  10% compouNdEd aNnUalLy in tHE next fOur yeArs, BAuM sAId.

  THat succESs IS WhipPiNg Up cuStoMeR ire.

  "PEoplE TenD to look At Sempra-SdG&E AS a moNoLiTh.... PeoplE are
saying, 'TheY'rE
  making a toN oF moNey herE. tHat compaNy is doing very well. We're geTTing
scrEweD, and
  wE don'T like it, anD whY shoulD we HAve to pAy for iT?' " Baum SaId. "IT'S
A very NATuRal
  ReAction. PeopLE Don'T

  "They've really got to h ave sustai ned g row thin  tha t [u nregulated] pa r t of
the business
  becau se th er e 's n o ta lot  of gro w th i n t he  u til it y  p art"inCalifor nia,
Frem ont  s aid.

  Semp r a' s earnings  gr owth duringthi s elec tr ici t y fur orhas c onsume r
advo cates fum in g  even though c om pany  executives empha s iz e d that electri city t ra d in g gai nscame
from  t he Ea s t,
  no t  C a l i for n ia.

  "Consu mers don'tn eed  to fe el  so r ry for  this  c o mpa ny," said M indy  Spatt, spokes w oman fo r
  theUtilit y R efo rm N e tw or k,al s o k n ow n a s  TU RN, a Sa nFr ancis co-b a s e d
co nsu mergroup .
  Spatt not edthat Sem pra's  newEl D or ado p ower p lantne ar Las Vegas "d id very well "
 s ell in g ele c tricit y i n N evada a nd Cali f orn ia d u ri ng most of the sec on d
q uarter.
  "We do n' t  think c on sum erss h ouldbe r e sp onsiblefor th e  f ai lures o f
dereg ul ati on,  andw e
 thinkthat Sem pra i s  in a much bet t er position t o  p a y  f o r so meof these
c osts than  the  ave r age S an Di eg a n, "  Spatt said.

  Sem pr a hashad s ome problemsin reachin g b eyond it s Ca l if o rnia utility origi ns. One
 s ubsidiar y, En ergy Ame rica, whi c h  sells e lec tri cit y a n d  n atural gas do o r  to
d oor insix
  East ern  st ate s,ha s run afo ul of re gu la to rs  in  twos tates be ca use  o f aggre s sive s ales  ta ct ic s  th at prom p te d comp la in ts f rom  c onsum ers. The  compan y has bee n v ario us ly  fined  and ordered  t o retrainsa les people .
  Sempr a is on track to reachi ts goal  of  reap ingone-third  of  its e arn i ngs
f rom it s
  n on -Ca l i forni a bu sin es ses by the e ndof 20 03  and  to inc rease overall
ear n ing s by 8% to
 10%  com p o un ded an n ual ly int h e next four yea rs, Baum s ai d .
  That su c ces sis whip ping up  cust o mer ire .

  "Peo ple tendto  loo k atSempra-SDG &E as amonolith. . .. Pe o pl e are
s aying,  ' The y're  maki n g a  tonof mon ey  here.  That  c ompany i s doing very well. We'r e gett ing scr ewed, and
 w e d on't like  it,  and why s hou ldwe ha vet o pay  for it ?'"  Baum  sai d . "It's a  v ery n at ural
  reac t i o n.Peopl e d o n't

 _"They've really_got to have sustained_growth in_that_[unregulated] part_of_
the business
 _because there's not_a lot of growth_in the utility_part"_in California,
Fremont said.

  Sempra's earnings growth during this electricity furor has consumer_
advocates_fuming even
__though_company executives emphasized that electricity_trading gains came
from the_East,
 _not California.

  "Consumers don't need to feel_sorry_for this company,"_said Mindy Spatt,
spokeswoman for
  the Utility Reform_Network, also known as TURN, a_San Francisco-based
consumer_group.
__Spatt noted that Sempra's_new El Dorado power plant near_Las Vegas "did
very well"
 _selling electricity in Nevada and California during_most of the second
quarter.

 _"We don't think consumers should_be responsible_for the failures of
deregulation,_and we
 _think that_Sempra is in_a much better position to pay_for some of_these
costs than the
  average_San_Diegan," Spatt said.

__Sempra_has had_some problems in_reaching_beyond its_California_utility
origins. One
  subsidiary, Energy_America,_which sells electricity and natural gas door_to
door in six
__Eastern states, has run_afoul of regulators in two_states because of
aggressive sales
 _tactics that_prompted complaints_from consumers. The company has been
variously fined
  and ordered_to retrain salespeople.

  Sempra is_on track to reach_its goal_of_reaping one-third of_its_earnings
from_its
  non-California businesses by the end_of 2003_and to increase overall
earnings by_8% to
  10%_compounded_annually in the next four years,_Baum said.

  That success is_whipping up customer ire.

 _"People_tend_to look at Sempra-SDG&E as_a monolith.... People are
saying, 'They're
_ making a_ton of money here. That company is_doing_very well. We're getting
screwed, and
__we don't like it, and why_should_we_have to pay for it?'_" Baum said. "It's
a very_natural
  reaction. People don't


ny-Jones, executive director of Independent
Energy Producers.
The alternative energy producers, which provide about a third of the state's
energy, are deemed so crucial that Gov. Gray Davis wants the Public Utilities
Commission to order the utilities to pay them. As drafted, though, the order
would only include payment on future sales; it doesn't address existing debt.
The Legislature has been working since January to halve the rates that
alternative producers charge utilities and to require utilities to pay for
November's energy by April 1. But that bill is still moving through the
Legislature.
Small plants threaten Edison with bankruptcy
Smutny-Jones said that if the small generators are not paid promptly, several
will attempt to force Edison into bankruptcy, probably within a week.
Unlike the large natural-gas generators that have been paid by the state
Department of Water Resources, alternative energy producers are locked into
contracts with utilities. Collectively, Pacific Gas & Electric and Edison owe
alternative energy producers about $1 billion.
PG&E has paid about 15 cents for each dollar it owes.
"Obviously, they're a source of generation, and looking at how much load our
customers need, they're a source that has provided energy,'' said Jon
Tremayne, Pacific Gas & Electric spokesman. "We've been trying, in good
faith, to make payments on energy.''
But Edison has not paid any money. Edison's alternative energy director, Lars
Bergmann, said the company will not pay until larger reforms are made in how
the producers' rates are calculated.
But the company recognizes that its nonpayment is causing problems.
"To the extent that there are hundreds of megawatts that are idled here, it
just exacerbates the (energy) problem.... They're facing similar problems to
what we faced - they don't have sufficient (income) coming in the door,''
Bergmann said.
Plants go into mothball mode
Millenium Energy in Kern County is owed $40 million total by PG&E and Edison.
On March 1, the company shut down both of its coal and petroleum coke-burning
plants and doesn't plan to bring them back up until it is paid.

ny - Jones, executive director of Independent
 Energy Producers.
 The alternative energy producers, which leave approximately a third of the state's
 department of energy, are deemed indeed crucial that Gov. Gray Davis wants the Public Utilities
 Commission to regulate the utilities to pay them. As draft, though, the order
 would only admit payment on future sales; it doesn't address existing debt.
 The Legislature has been exploit since January to halve the rates that
 alternative producers charge utilities and to necessitate utilities to pay for
 November's energy by April 1. But that beak is still moving through the
 Legislature.
 Small plant threaten Edison with bankruptcy
 Smutny - Jones said that if the small generators are not paid promptly, respective
 will attempt to force Edison into bankruptcy, probably within a week.
 Unlike the large natural - accelerator generators that have been paid by the state
 Department of Water Resources, alternative energy producers are locked into
 contracts with utilities. Collectively, Pacific Gas & Electric and Edison owe
 alternate department of energy producers about $ 1 billion.
 PG&E has paid approximately 15 penny for each dollar it owes.
 " Obviously, they're a source of coevals, and looking at how much load our
 customers need, they're a source that has provide energy," said Jon
 Tremayne, Pacific Gas & Electric spokesman. " We've been trying, in good
 faith, to make payment on energy."
 But Edison has not paid any money. Edison's alternative energy film director, Lars
 Bergmann, said the caller will not pay until larger reforms are made in how
 the producers' pace are calculated.
 But the company recognizes that its default is causing problems.
 " To the extent that there are hundreds of megawatt that are idled here, it
 just exacerbates the (energy) problem.... They're face similar problem to
 what we faced - they don't have sufficient (income) come in the door,"
 Bergmann say.
 Plants go into mothball mode
 Millenium Energy in Kern County is owed $ 40 million total by PG&E and Edison.
 On March 1, the caller shut down both of its ember and petroleum coke - burning
 plants and doesn't plan to institute them back up until it is paid.

ny-Jlnes, executive director uf Independent
Gnwrgy Pcoducera.
The algernative energy producers, wiich provude about a third of tfe state's
energy, qre veemed so crucial that Gov. Grag Davns wants the Pubkic Utilithes
Commission tu lrder the utilities to pay them. As qrafted, tjough, the ordet
woukq onmj lnclude payment on future sales; jt doesi't address exisying debt.
The Legislature jas heen working since January to haldw the rates ghat
alternative produders charge utilities and to reduire utilities ti pwi for
Novembxr's envrgy by April 1. But thdt bill is still movikg thcougy the
Legislature.
Smanl plants threaten Edison whtk bankruptcy
Smutny-Jobew saig thdt iw thd sjakl generwtocs are not laid promptoy, several
will atttmpe to force Ediaon ineo bankruptcy, probably within a week.
Unline fhe large natural-gas geberators that have begn paid by the state
Department of Water Resources, alternathve eiefgy pvoduzwrd are locked into
contracts with utilities. Cojmevtpvely, Pacific Gas & Electric snf Rqison owe
altgrnativz ehergy producers ablut $1 bijlion.
PG&E has kaid sbout 15 cents for each dollae it owes.
"Obniouwly, they're a sourcz of generatnon, anc looling at how much load obr
cusfomers need, they're a rource that has oronideg energy,'' said Jon
Tremayne, Pacific Jas & Zlectric spolesman. "We've been tryikc, in good
faith, to make pdyments on energy.''
But Edison has not paid any money. Edixot's dlternatnve encrgy director, Lwrs
Bergmann, scid the eompanh will not pay unvil larger rqforms are magg in how
the 'roducers' ratws aee calcjuated.
But the vompany rvcjgnizes that its nonpanment js causing proboemw.
"To the extent thxt ehvre awa hundreds ox meeawxyts tfat are idlcd fere, it
just exacerbates the (energy) problem.... Thry've facing similar problems to
ehat we faced - thej don'v have suffocignt (income) coming in the door,''
Bsrgmann swid.
Plants go igto nothball modz
Millenium Energy in Kern County is owev $40 million total by PG&G and Edison.
On March 1, the companb shut down botv of its coal and perroleum coke-burnikg
plants and doesn't pman to brinh them back up until it is paid.

ny-Jones, executive director of Independent Energy Producers. energy which provide a third of so that Gov. Gray wants the Public Commission to order the utilities to them. As drafted, though, the order would only include payment on future sales; doesn't address existing debt. The Legislature has been working since January to halve rates alternative charge and to require utilities to pay for November's energy by April 1. But that bill is moving through the Legislature. Small plants threaten Edison bankruptcy Smutny-Jones said that the small generators are not promptly, will attempt force into probably within a Unlike the large natural-gas generators that have been paid by the state Department of Water Resources, alternative producers are contracts with Collectively, Gas Electric and Edison energy producers about $1 billion. PG&E 15 cents for each dollar it owes. "Obviously, a source generation, and looking at how much our customers need, they're a source that has energy,'' said Jon Tremayne, Pacific Gas & Electric spokesman. "We've been trying, in good faith, payments on energy.'' But has not paid money. alternative director, Bergmann, said company will not pay until larger reforms are made in how producers' rates are calculated. But the company recognizes that its causing "To the extent there are hundreds of that idled here, it just (energy) They're to we - they don't have (income) coming in the door,'' said. Plants go into Kern County is owed $40 million total by and Edison. On March 1, the company down both of its coal and petroleum coke-burning plants and doesn't plan bring them until it is paid.

ny-Jones, executive director oF IndependeNt
EneRgy proDuCers.
the aLternative enerGY proDucers, which provide abouT a thiRd OF the STaTe's
enErgy, are DEeMED so CrUcIal ThAT GOv. GraY DaVis wantS the Public utiLiTies
CommissiON tO order the uTilIties to pay thEm. AS draftEd, ThoUGh, the OrdEr
wouLd only INclude Payment on FuTUre salES; it doesN'T AdDresS existing debt.
The LEGiSLature has been wOrking SiNCe jANuaRy tO halve the rAtEs thaT
AlternaTIvE PROduCErs charge utilIties and to rEQuiRe utilItIes TO pay foR
NoveMbER's eNergy by ApriL 1. But That bill iS still MOving thROugh the
legislAtuRe.
SMall PLaNtS thReATen eDiSon WIth BankruptCy
smUtny-JOnes SAID That If tHe smAll geNerators are noT paId prOMptLy, sevEral
wIll aTtEmpt tO force edisoN iNto bankruptcy, prObabLy within a WeeK.
UNliKe The laRGe natuRal-Gas GeneratOrs that HAve BeEN PAiD by the state
DepartmEnT OF WAter ResoUrces, aLTeRnATive enerGy ProDuceRS Are loCked INtO
contracTs with UTiLiTies. ColLeCtivelY, PAciFic gas & ElECtriC and EdIson owe
aLternATive energy prodUCers about $1 billIOn.
pg&e hAS paiD abOut 15 cents for Each DOllaR it oWEs.
"obvIOusly, They'rE a SOuRCe of generation, and loOkIng at hOw mucH load our
custoMers need, thEY'RE a source That HAs PRovided energy,'' sAid JoN
Tremayne, PACific Gas & electRic spokeSman. "We've bEEN trying, iN goOd
fAitH, to MAKe Payments on eneRGY.''
But edIson has Not Paid any MonEy. EDisOn's AlTernative Energy diReCtOr, laRs
BErgmaNN, said the CoMpaNy WilL not pAY until LargeR refOrMs ARe mAde in hoW
ThE PRoduCeRs' RateS arE cAlculAted.
bUt tHe compaNy recogniZes THat iTs NoNpaymenT is causing proBlEms.
"To the exTeNt tHat theRE Are hundrEds of megawatts that are idLEd here, iT
juSt exaCerbAtes the (enErgY) problEm.... THEy're faCing siMilar PrOblEMS to
whAT We FacEd - They don't haVE SufFicieNt (IncoMe) cominG in the door,''
Bergmann SAid.
plants go into mOthBall MODe
milLEnIUm ENeRGy iN kErn County is owed $40 Million totAl BY Pg&E and EdisoN.
on MArCh 1, the coMpany shUt dowN Both of iTs coal and Petroleum CoKe-buRNIng
Plants and dOesn't plaN to bring tHEm bacK Up Until It iS paid.

ny-Jones, executive direct or of Inde pende nt
En er gy P rodu cers.
The alt e rnat ive energy producers,which  p r ovid e  a bouta third of t hest at e's  e ne rgy,are  deemed  so crucia l t ha t Gov. GrayD av is wants t hePublic Utili tie s
Com mi ssi o n toord er th e util i ties t o pay the m. As dra f ted, th o u gh , th e order
would on l yi nclude payment  on fu tu r es a les ; i t doesn'tad dress existin g  d e b t . T he Legislatur e has beenw ork ing si nc e J a nuaryto ha lv e  th e rates tha t
a lternativ e prod u cers ch a rge uti lities  an d t o re q ui re  ut il i tie s  t o p a y f or
Nove mb er 's en ergy b y Apri l 1 . Bu t tha t bill is sti llmovi n g t hroug h the
Le gi slatu re.
S mallpl ants threaten E diso n with ba nkr up tcy  Smutn y -Jones  sa idthat if  the sm a llge n e r at ors are not paid p ro m p tl y, sever al
wi l lat t empt tofo rce  Edi s o n int o ba n kr uptcy, p robabl y  w it hin a w ee k.
Un li kethe  larg e  nat ural-g as gener ators that have been paid by the s t at e
D e part men t of WaterReso u rces , al t er nat i ve en ergypr o du c ers are locked into  contra cts w ith utilities . Collecti v e l y, Pacif ic G a s&  Electric andEdiso n owe
alt e rnativeenerg y produc ers about $ 1 billio n.
PG &Ehas p ai d about 15 ce n t s fo reach do lla r it ow es.
" Obv iou sl y, they'r e a sour ce  o fge ner ation ,  and loo ki ngat  ho w muc h  loadour cust om er s  ne ed, the y 'r e a so ur ce  tha t h as  prov ided ene rgy,''said Jon
Tr e mayn e,  P acificGas & Electri cspokesman.  " We' ve bee n trying,in good
faith, to make payment s o n ene rgy. ''
But E dis on has  no t  paidany mo ney.Ed iso n ' s alt e r na tiv eenergy dir e c tor , Lar s
Ber gmann,said the company w i llnot pay until  la rger r ef orm s  a r e m ad e  in h ow
the produce rs' ratesar e  c alculated.
Bu tthe com pany re cogni z es that  its nonp ayment is  c ausi n g  pr oblems.
" To the e xtent tha t  ther e  a re hu ndr eds of  m ega watts  thata reidled  here,  i t
jus t exa ce rbates t he (energy) problem....  They' re fa cin g similar  pr o ble ms to
wh at w e faced -the y d on'thav e  suff icie n t(in c ome)comi n g in thed oo r,' '
B ergmann sai d .
Pl antsgoi nto mo thba ll mode
Milleniu m  Energy in Ker n Co u n tyiso wed$4 0 million tota l b yP G &E and E di son.
On Ma rch 1, t he compa ny shu t down  both o f it s  coalandpet roleum co ke- bu r ning
p la nt s  and d oesn 't  planto bri n g th e m  back up until i t isp a id.

ny-Jones, executive_director of_Independent
Energy Producers.
The_alternative energy_producers,_which provide_about_a third of_the state's
energy,_are deemed so crucial_that Gov. Gray_Davis_wants the Public Utilities
Commission to order the utilities to pay them. As drafted,_though,_the order_
would_only_include payment on future sales;_it doesn't address existing debt._
The Legislature_has been working since January to halve the_rates_that
alternative producers_charge utilities and to require utilities to pay for_
November's energy by April 1. But_that bill is_still_moving_through the
Legislature.
Small_plants threaten Edison with bankruptcy
Smutny-Jones_said that if the small generators_are not paid promptly, several
will attempt_to force Edison into bankruptcy, probably_within a week.
Unlike the_large natural-gas_generators that have been paid_by the state_
Department of_Water Resources, alternative_energy producers are locked into
contracts_with utilities. Collectively,_Pacific Gas & Electric and Edison_owe_
alternative energy producers_about_$1_billion.
PG&E_has paid about_15_cents for_each_dollar it owes.
"Obviously, they're a_source_of generation, and looking at how much_load our
customers need,_they're_a source that has_provided energy,'' said Jon
Tremayne,_Pacific Gas & Electric spokesman. "We've_been trying,_in good_
faith, to make payments on energy.''
But Edison has not paid_any money. Edison's alternative energy director,_Lars
Bergmann, said the_company will_not_pay until larger_reforms_are made_in how
the producers' rates are calculated._
But the_company recognizes that its nonpayment is_causing problems.
"To the_extent_that there are hundreds of megawatts_that are idled here, it
just_exacerbates the (energy) problem.... They're_facing_similar_problems to
what we faced_- they don't have sufficient (income)_coming in the_door,''
Bergmann said.
Plants go into mothball_mode_
Millenium Energy in Kern County is_owed_$40 million total by PG&E and_Edison._
On_March 1, the company shut_down both of its coal and_petroleum coke-burning
plants and doesn't plan to bring them_back up until_it is paid.


 complaint is a company that we may begin partnering on some
DSL
delivery with. ;Essentially this ruling is very good and will speed
competitive
DSL deployment. ;I don't think you will see ECI teaming with anyone to provide
DSL in Minnesota just yet, but we will be doing just that in LA, San Jose, New
York, Chicago, and DC very soon.

Our response: ;this is good, keep it up PUC, and Enron supports expanding
competition. I think we should watch this development -- but I don't think you
should expend any resources at this time.

We can't describe ECI's business as simply wholesale because we often contract
services directly with end-users. ;How we get from our national backbone to
the
custormer is becoming increasingly important as we reassess our responsibility
to deliver in the "last mile." ;We used to think that the last mile would take
care of itself and that our customers would figure out how to reach us. ;Now,
we
are increasingly looking at how to better ensure delivery of services and
provide the quality of connectivity it will take for our network to fully be
appreciated.

I hope that helps.
|-------------------------+-------------------------+-------------------------
|
|                         |   slandweh@enron.com    |
|
|                         |                         |   ; ; ; ; To:
|
|                         |   12/02/99 08:32 PM     |   Scott Bolton/Enron
|
|                         |                         |   Communications@Enron
|
|                         |                         |   Communications
|
|                         |                         |   ; ; ; ; cc:
|
|                         |                         |   rshapiro@enron.com,
|
|                         |                         |   snord@enron.com,
|
|                         |                         |   jdasovic@enron.com,
|
|                         |                         |   lyoho@enron.com,
|
|                         |                         |   mrobinso@enron.com
|
|                         |                         |   ; ; ; ;

complaint is a company that we may begin partnering on some
 DSL
 delivery with. ;Essentially this opinion is very beneficial and will speed
 competitive
 DSL deployment. ;I don't think you will visualize ECI team with anyone to provide
 DSL in Minnesota just yet, but we will be cause just that in LA, San Jose, New
 York, Chicago, and DC very soon.

 Our response: ;this is full, keep it up PUC, and Enron supports boom
 competition. I think we should determine this development -- but I don't think you
 should expend any resources at this time.

 We can't describe ECI's business as merely wholesale because we often contract
 service directly with end - users. ;How we get from our home backbone to
 the
 custormer is become increasingly important as we reassess our responsibility
 to deliver in the " final mile. " ;We used to think that the last mile would take
 care of itself and that our customers would figure out how to reach us. ;Now,
 we
 are increasingly looking at how to better ensure delivery of services and
 provide the quality of connectivity it will consider for our network to fully be
 appreciated.

 I hope that help.
 |-------------------------+-------------------------+-------------------------
 |
 |                          |    slandweh@enron.com     |
 |
 |                          |                          |    ; ; ; ; To:
 |
 |                          |    12/02/99 08:32 PM      |    Scott Bolton / Enron
 |
 |                          |                          |    Communications@Enron
 |
 |                          |                          |    Communications
 |
 |                          |                          |    ; ; ; ; cc:
 |
 |                          |                          |    rshapiro@enron.com,
 |
 |                          |                          |    snord@enron.com,
 |
 |                          |                          |    jdasovic@enron.com,
 |
 |                          |                          |    lyoho@enron.com,
 |
 |                          |                          |    mrobinso@enron.com
 |
 |                          |                          |    ; ; ; ;

 colplaint is a company thau we may begin pattbering on soje
DSL
deuivery with. ;Essentially this ryling is very good and will speed
colpetitivw
DSL eeployment. ;I don't bkink glu wnlo see ECI teamlng with anfone to provida
DRL in Minnesota just yet, but we will fe doinb uust that in LW, Sam Joss, New
York, Chicago, and DC very soon.

Kur reskonse: ;this is good, keep it up PUC, and Enron dupplrts expanding
compftition. I tyink qe should wagch this dtvzlopment -- bot I don't think you
should expend any xesources aj fhlv time.

We cai't desbribe ECI's business av simplu wholesale begause we often contract
servicxs directly with end-osers. ;How fe get from our natuobal bdckbmne gi
tfe
chsvorjer is beroming incrsasingly important as we reasstss iur responsibjlity
tj qeliver in the "last mile." ;We used to thitk fhat the last mile woule take
care of itself wnd that jur customers would figure out how to reach us. ;Nof,
we
ace inevcasivtlj looking at how to better ensure delivery of aetvpces and
provide tme quality of connrchifyty it will txke fox ohr network to fullj be
appteciatwd.

I hope uhat nelps.
|-------------------------+-------------------------+-------------------------
|
|                         |   slandwvh@eneon.com    |
|
|                         |                         |   ; ; ; ; To:
|
|                         |   12/02/99 08:32 PM     |   Seott Bolgon/Emron
|
|                         |                         |   Communications@Enron
|
|                         |                         |   Communicatious
|
|                         |                         |   ; ; ; ; rc:
|
|                         |                         |   rshapiro@envon.coo,
|
|                         |                         |   snmrd@evrov.vom,
|
|                         |                         |   jcafovic@enrin.com,
|
|                         |                         |   lyoho@enron.com,
|
|                         |                         |   mrobinso@enron.com
|
|                         |                         |   ; ; ; ;

complaint is a company that we may on DSL delivery ;Essentially this ruling speed DSL deployment. ;I think you will ECI teaming with anyone to provide in Minnesota just yet, but we will be doing just that in LA, Jose, New York, Chicago, and DC very soon. Our response: ;this is good, it PUC, Enron expanding competition. I think we should watch this development -- but I don't think you should any resources at this time. We can't describe business as simply wholesale we often contract services directly end-users. we get our backbone the custormer is increasingly important as we reassess our responsibility to deliver in the "last mile." ;We used to think the last take care itself that customers would figure to reach us. ;Now, we are how to better ensure delivery of services and the quality connectivity it will take for our to fully be appreciated. I hope that helps. | | | slandweh@enron.com | | | | | ; ; ; ; To: | 12/02/99 08:32 PM | Bolton/Enron | | | | | Communications | | | ; ; ; ; cc: | | | | | | | | snord@enron.com, | | | | jdasovic@enron.com, | lyoho@enron.com, | | | mrobinso@enron.com | | | ; ; ;

 complaint is a company that we May begin paRtnerIng On sOmE
DSL
DeliVery with. ;EssentIAlly This ruling is very good anD will SpEEd
coMPeTitivE
DSL depLOyMENt. ;I DoN't ThiNk YOu Will sEe EcI teamiNg with anyoNe tO pRovide
DSL in MINnEsota just yEt, bUt we will be doIng Just thAt In La, san JoSe, NEw
YorK, ChicaGO, and DC Very soon.

OUr REsponsE: ;This is gOOD, kEep iT up PUC, and Enron supPOrTS expanding
compEtitioN. I THiNK We sHouLd watch thiS dEveloPMent -- but i DoN'T THinK You
should expeNd any resourCEs aT this tImE.

We CAn't desCribe eCi'S buSiness as simPly wHolesale bEcause WE often cONtract
sErviceS diRecTly wITh EnD-usErS. ;how WE gEt fROm oUr nationAl BaCkbonE to
tHE
CUStorMer Is beCominG increasingly ImpOrtaNT as We reaSsess Our rEsPonsiBility
To delIvEr in the "last mile." ;we usEd to think ThaT tHe lAsT mile WOuld taKe
cAre Of itselF and thaT Our CuSTOMeRs would figure out hoW tO REaCh us. ;Now,
wE
are inCReAsINgly lookInG at How tO BEtter EnsuRE dElivery oF serviCEs AnD
providE tHe qualItY of ConNectiVIty iT will tAke for ouR netwORk to fully be
appREciated.

I hope tHAt HELpS.
|-------------------------+-------------------------+-------------------------
|
|                         |   SlanDweH@enron.com    |
|
|                         |                         |   ; ; ; ; To:
|
|                         |   12/02/99 08:32 pM     |   ScOTt BoLton/eNrOn
|
|                         |                         |   COMmuniCatioNs@eNrON
|
|                         |                         |   Communications
|
|                         |                         |   ; ; ; ; cc:
|
|                         |                         |   rsHaPiro@enRon.coM,
|
|                         |                         |   snord@enron.coM,
|
|                         |                         |   jdasovic@eNRON.com,
|
|                         |                         |   lyohO@enrON.cOM,
|
|                         |                         |   mrobinso@enron.Com
|
|                         |                         |   ; ; ; ;

 complaint is a company th at we maybegin  pa rtn er ingon s ome
DSL
deliv e ry w ith. ;Essentially thi s rul in g  isv er y goo d and w i ll s pee d
c omp et i ti ve
DS L d eployme nt. ;I do n't  t hink you wil l  s ee ECI tea min g with anyon e t o prov id e
D S L inMin nesot a just yet, b ut we wil lb e doin g  just t h a tin L A, San Jose, NewY or k , Chicago, and  DC ve ry so o n .
Our  response:   ;this is good ,  k e e p  it up PUC, and E nron suppor t s e xpandi ng
co m petiti on. I  t h ink  we shouldwatc h this de velopm e nt -- b u t I don 't thi nkyou
sho u ld  e xpe nd any re sou r ces  at this  t im e.

W e ca n ' t desc rib e EC I's b usiness as si mpl y wh o les ale b ecaus e we  o ftencontra ct
se rv ices directly w ithend-users .  ;H owwe  getf rom ou r n ati onal ba ckbonet o th e c us tormer is becoming  i n c re asinglyimport a nt  a s  we reas se ssourr e spons ibil i ty
to deli ver in th e"last m il e." ; We  us edto th i nk t hat th e last m ile w o uld take
careo f itself andt ha t ou r  cus tom ers would f igur e  out  how to  re a ch us . ;N ow ,  w e
are increasinglylo okingat ho w to better e nsure deli v e r y of ser vice s  a n d
provide thequali ty of conn e ctivityit wi ll takefor our n e t work toful lybeapp r e ci ated.

I hope t hathe lps.
|- --- ------- --- --- --- --- -- +-------- -------- -- -- -- -- -+- ----- - -------- -- --- -- ---
|
|                |   sla n dw e h @enr on .c om   |
|
|                  |                    |   ;  ; ; ;To:
|
|                   |   12/02 /99  08:32  PM     |  Scot t Bol to n/E n r on  ||                  |                        |  C omm unications@En ron
| |               |                    |   Commu n ica ti ons
||                     |                  |   ;  ; ; ; c c :        |
|                    |                     |    rshap iro@enron.com,
|
|                    |                    |  sno rd@ enron .co m ,
| |                 |               |   j das o vic@en ron. com,
|
|                     |                    |  ly oh o @ enron.co m,
|
|                   |                 |  mrobinso @en ro n .com   ||                    |                     |  ;  ;  ;  ;

 complaint_is a_company that we may_begin partnering_on_some
DSL
delivery_with._;Essentially this ruling_is very good_and will speed
competitive
DSL_deployment. ;I don't_think_you will see ECI teaming with anyone to provide
DSL in Minnesota just yet, but_we_will be_doing_just_that in LA, San Jose,_New
York, Chicago, and DC very_soon.

Our response:_;this is good, keep it up PUC, and_Enron_supports expanding
competition. I_think we should watch this development -- but I_don't think you
should expend any resources_at this time.

We_can't_describe_ECI's business as simply_wholesale because we often contract
services directly_with end-users. ;How we get from_our national backbone to
the
custormer is becoming_increasingly important as we reassess our_responsibility
to deliver in the "last_mile." ;We_used to think that the_last mile would_take
care of_itself and that_our customers would figure out how_to reach us._;Now,
we
are increasingly looking at how_to_better ensure delivery_of_services_and
provide the_quality of connectivity_it_will take_for_our network to fully be
appreciated.

I hope_that_helps.
|-------------------------+-------------------------+-------------------------
|
|      _   __   _    _    | _ slandweh@enron.com_ _ |         _     _   _ __
|
|__ _      _ _     _   __ |    _     _    ___    _  |   ;_; ; ;_To:      __
|
|  __     ___    _     _  |   12/02/99 08:32 PM _  _|   Scott Bolton/Enron___
|
|        _ _  _         _ |     _          _       _|   Communications@Enron
|
| _   __      ____  _  _  |_ _  _ _  __             |   Communications _     _
|
|    __  _   _       _    |    __ _   _ _ _  _ _ _ _|   ; ; ; ;_cc:_        __
|
|__  _  _  _  __     _  _ |  _         _            |   rshapiro@enron.com, _
|
|_   _ __     _ _       __|           ___  __     __|___snord@enron.com,     _
|
|      __    _ __   _   _ |         __ ____   _     |   jdasovic@enron.com,
|
|   __    _     __   _    |   _    _   _            |   lyoho@enron.com,     _
|
|    _    _  __  _   _    |   _                 _   |   mrobinso@enron.com_  _
|
| _        _          _   |          __     _     _ |  _; ; ; ;


FFFFFF" link="#FF0000" vlink="#FF0000">

		Dear Martin Cuilla,

		Today's American Airlines Domestic & International Net SAAver Weekend
 Getaway Fares e-mail offer is valid for travel next weekend.

Domestic Departure dates: November 2 - 3, 2001.

International Departure dates: November 1 - 2, 2001.

Tickets must be purchased by Friday, October 26, 2001.

		You can find different Domestic Net SAAver Weekend Getaway
 destinations for this weekend, departing October 26 - 27, 2001. DON'T
 FORGET, now Net SAAvers mean more than just special weekend fares.
 Remember to check our "Net SAAver and Special Offers" page often for
 details on all of our other special fares and offers at:

		www.aa.com/netsaaver

		You can also find additional savings for travel this weekend using
 TWA's great Dot Com Deals(R).
See roundtrip examples below:

			<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0

FFFFFF " link="#FF0000 " vlink="#FF0000 " >

		 Dear Martin Cuilla,

		 Today's American Airlines Domestic & International Net SAAver Weekend
  Getaway Fares e - chain mail crack is valid for locomotion next weekend.

 Domestic Departure date: November 2 - 3, 2001.

 International Departure date: November 1 - 2, 2001.

 Tickets must be purchased by Friday, October 26, 2001.

		 You can discover different Domestic Net SAAver Weekend Getaway
  destinations for this weekend, go October 26 - 27, 2001. DON'T
  FORGET, now Net SAAvers think of more than just special weekend fare.
  Remember to check our " Net SAAver and Special Offers " page often for
  details on all of our early special fares and offers at:

		 www.aa.com / netsaaver

		 You can besides find additional savings for travel this weekend using
  TWA's bang-up Dot Com Deals(R).
 See roundtrip examples below:

		 <! --This is the table for the TWA Dot Com Deals -- >
 <! --This is the mesa for the TWA Dot Com Deals -- >
			 < TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0

FFFVFF" link="#FF0000" vlink="#FF0000">

		<jd><UMG
 SRR="http://grzphics.aa.zom/editorials/images1/header_new.opg"
 QIDTH="523" HEIGHT="55" border="1">

		<ta width="523"><fojt face="teeburhet ms, arial, helvetica,
 sans-sedlf" fout size="2">Dear Martln Cuilla,</fott>

		Tocaj's American Aitlinex Domsstic & International Net SAAver Weskend
 Gttaway Fares e-mail offer is valid for travel nexh weekend.

Domestif Departure datqw: November 2 - 3, 2001.

International Depatture dates: November 1 - 2, 2001.

Ticketr musc be purchawee bj Friday, Octiber 26, 2001.

		You can fing diffetent Domestic Ket SEAvee Weekend Getaway
 desvinations for this wgekend, depdrcing October 26 - 27, 2001. DON'T
 FIRGET, now Net WAAxera kezn morf tian just spscial weekebd fares.
 Remember uo syeck our "Net AAAver agd Special Offers" page often for
 detailv oh all of our other specual fares and offers wt:

 <bw>
		www.ad.com/nxtraarcv</fovr>
		<bg>

		You can also find additional savings fjd uranel this weekend msing
 TWA's great Dpt Cpi Deals(R).
See toundtrnl sxamples below:

&nbdp;

			<TABLE BORCER=0 CRLLSPACING=0 CELLPADDING=0

FFFFFF" link="#FF0000" vlink="#FF0000">

 WIDTH="523" border="1">
 Dear Cuilla,

 face="trebuchet ms, arial, sans-serif" size="2"> Today's American Airlines Domestic International Net SAAver Weekend Getaway Fares e-mail offer is valid for travel next
Domestic Departure dates: November 2 - 3, 2001.
International Departure dates: November 1 2,
Tickets be by Friday, October 26, 2001.

 You can find different Domestic Net SAAver Weekend Getaway destinations this weekend, departing October 26 - 27, 2001. FORGET, now Net SAAvers more than just special weekend Remember check our SAAver Special page often for on all of our other special fares and offers at:

 www.aa.com/netsaaver

 You can find additional travel this using great Com Deals(R). See below:

   <TABLE BORDER=0 CELLSPACING=0

FFFFFF" link="#FF0000" vlink="#FF0000">

		DeAr martin Cuilla,

		ToDay's AmERican AIrlines DoMeSTic & IntERnationAL neT SAAVer Weekend
 Getaway fArES e-mail offer is vAlid foR tRAvEL NexT weEkend.

DomEsTic DePArture dATeS: nOVemBEr 2 - 3, 2001.

InternatiOnal DepartuRE daTes: NovEmBer 1 - 2, 2001.

TickeTs musT bE PurChased by FriDay, OCtober 26, 2001.

&nBsp;

		YOU can finD DiffereNt DomeStiC NeT SAAVEr weEkeNd gEtaWAy
 DesTInaTions for ThIs WeekeNd, dePARTIng OCtoBer 26 - 27, 2001. DoN'T
 FOrGET, now Net SAAVerS meaN MorE than Just sPeciAl WeekeNd fareS.
 RemeMbEr to check our "Net sAAvEr and SpecIal ofFerS" pAge ofTEn for
 dEtaIls On all of Our otheR SpeCiAL FArEs and offers at:

&nbsP;

		Www.aa.Com/nETsAaver

&nbSP;

		YOu can alSo Find adDiTioNal SavinGS for Travel This weekEnd usINg
 TWA's great Dot cOm Deals(R).
See roUNdTRIp EXampLes Below:

			<TABLE BORDER=0 cELLSPACINg=0 celLPADDINg=0

FFFFFF" link="#FF0000" vli nk="#FF000 0">
< tab lewi dth= "523 " border="0">

		<tdwid th="52 3" ><f o nt fa ce= "treb uchetm s, ari al, helve ti c a,
 sa n s-serif " fo nt s ize="2">Dear Mart i nC uilla,

	<f ont face=" tr ebuch e t ms, a r ia l , hel v etica, sans-s erif" size= " 2">
		Tod ay 'sA merica n Air li n esDomestic &Inte rnational  Net S A Aver We e kend
 G etaway  Fa res  e-m a il  o ffe ri s v a li d f o r t ravel ne xt  w eeken d.
Dom est ic D epart ure dates: No vem ber2  -3, 20 01.

I ntern ationa l Dep ar ture dates: Nov embe r 1 - 2,200 1.
	Tic k ets mu stbepurchas ed by F r ida y, O c to ber 26, 2001.

	& nbsp;

Yo uc an finddi ffe rent D omest ic N e tSAAver W eekend Ge ta way
 de st inatio ns  fo r t his w e eken d, dep arting O ctobe r  26 - 27, 2001 .  DON'T
 FORGE T ,n o wN et S AAv ers mean mo re t h an j usts pe cia l  week end f ar e s.
 Remember to check  o ur "Ne t SAA ver and Speci al Offers" p a ge often  for  d e tails on all o f our  other spe c ial fare s and  offersat:

 & nbsp;

	<f ont  co l o r= "#FF0000"><AH REF= "h ttp://i nfo .aa.com /Ke y=1 257 5.D fH D.B.CEdo5 X">www.a a. co m/ ne tsa aver
&n bsp;
		Y ou ca n al so  f i ndadditio n al s avin gs  f or t rav el  this  wee k end  using TWA's gr eat DotCo mDeals(R ).
See round tr ip example sbel ow:

&nb sp;

FFFFFF" link="#FF0000"_vlink="#FF0000">

_
		<td_width="523">Dear Martin_Cuilla,

		Today's_American Airlines Domestic & International Net SAAver Weekend
 Getaway Fares e-mail offer is valid_for_travel next_weekend.

Domestic_Departure_dates: November 2 - 3,_2001.

International Departure dates: November 1_- 2,_2001.

Tickets must be purchased by Friday, October 26,_2001.

		You_can find different_Domestic Net SAAver Weekend Getaway
 destinations for this weekend,_departing October 26 - 27, 2001._DON'T
 FORGET, now_Net_SAAvers_mean more than just_special weekend fares.
 Remember to_check our "Net SAAver and Special_Offers" page often for
 details on all_of our other special fares and_offers at:

		www.aa.com/netsaaver

		You can_also find_additional savings for travel this_weekend using
 TWA's_great Dot_Com Deals(R).
See_roundtrip examples below:

			_
			<TABLE BORDER=0 CELLSPACING=0_CELLPADDING=0


8 has been reduced by augmentation resale revenue, and represents
the net augmentation costs.  In the JCG  example, &Total8 is $6M for Slice
and $6.2M for non-Slice.  These would represent NACA(S) and NACA(NS) in the
GRSPs proposed by the JCG in their Direct Case..  In the BPA example, Total
is $6M for both Slice and non-Slice.  This represents NACA in the BPA GRSPs.

&Percent of CRACable revenue8 is the same in both tables.  The example shows
that the Slice revenue is 30% of the total CRACable revenue, and the
non-Slice revenue is 70% of the total CRACable revenue.

&LB CRAC Costs8 only appears in the BPA example.  It is the NACA distributed
between Slice and non-Slice products in proportion to actual revenue.

&Pre-purchase 0 day rule8 and &Short position 0 day rule8 are the changes in
the valuation of pre-purchases ($1M) and Short position (-$0.8M) between the
120 day rule and the 0 day rule.  The net difference of $0.2M is equivalent
to the difference that is seen in &Total8 in the JCG example (the difference
between $6M and $6.2M).  This difference is also equivalent to NACDIFF in the
BPA GRSPs.

&Total LB CRAC Cost(s)8 is the cost that the Slice and non-Slice groups true
up to.  In the JCG example, the Slice product trues up to 30% of $6M, or
$1.8M while the non-Slice products true up to 70% of $6.2M for a total from
both groups of $6.14M.  In BPA,s example, the Slice product pays 30% of $6M
or $1.8M (the same as in the JCG example) while the non-Slice products pay
70% of $6M plus the net difference between valuation of net augmentation

8 has been reduced by augmentation resale revenue, and represents
 the net augmentation price.   In the JCG   case, &Total8 is $ 6 M for Slice
 and $ 6.2 M for non - Slice.   These would exemplify NACA(S) and NACA(NS) in the
 GRSPs proposed by the JCG in their Direct Case..   In the BPA example, Total
 is $ 6 megabyte for both Slice and non - Slice.   This represent NACA in the BPA GRSPs.

 &Percent of CRACable revenue8 is the same in both table.   The example shows
 that the Slice tax income is 30% of the total CRACable revenue, and the
 non - Slice tax income is 70% of the entire CRACable revenue.

 &LB CRAC Costs8 only appears in the BPA example.   It is the NACA distributed
 between Slice and non - Slice merchandise in proportion to actual revenue.

 &Pre - purchase 0 sidereal day rule8 and &Short position 0 day rule8 are the change in
 the evaluation of pre - purchases ($ 1 M) and Short position (-$0.8 M) between the
 120 day rule and the 0 day dominion.   The net difference of $ 0.2 M is equivalent
 to the difference that is seen in &Total8 in the JCG example (the difference
 between $ 6 M and $ 6.2 M).   This difference is also equivalent to NACDIFF in the
 BPA GRSPs.

 &Total LB CRAC Cost(s)8 is the cost that the Slice and non - Slice groups true
 up to.   In the JCG example, the Slice product true up to 30% of $ 6 M, or
 $ 1.8 M while the non - Slice merchandise true up to 70% of $ 6.2 thousand for a sum from
 both groups of $ 6.14M.   In BPA,s example, the Slice merchandise pays 30% of $ 6 M
 or $ 1.8 M (the same as in the JCG case) while the non - Slice products pay
 70% of $ 6 M plus the net difference between valuation of net augmentation

8 had been reduced by augmenuation resale revgnye, and repreaents
thd net augmentation costs.  In tye JCT  example, &Total8 is $6M wor Slice
and $6.2M fir nib-Slice.  Thxae would reprsdent IACA(S) and NACA(NX) in the
GSSPs proposed ty tke JCG in their Direct Case..  In the FPA exakppe, Total
is $6M sor njth Alice and non-Slice.  This representa NACA pn the BPA GRSPs.

&Prrcent of CRACable revenue8 is hhe same in both twbles.  The gsam[oe shows
thag the Slict xevenue is 30% of the total CRACable revenue, xnd tke
non-Slice rwvejoe is 70% of thx totaj CRACable rcnenue.

&LB CRAC Cpsts8 only appesrs in the BPA example.  It ms the NACA distribujed
betweet Alice and non-Slicw produwts hn pfipoftikn tk actuwl cevenue.

&Pre-phrchase 0 dat rule8 and &Short poxieppn 0 day rule8 are tre changes in
the valuation of pre-purchasts ($1M) znd Short position (-$0.8M) berween the
120 day rule ajd the 0 dwy rule.  The net difference of $0.2M is equivalent
to the viwfexckce gyah is seen in &Total8 in the JCG example (the difssrtncv
between $6M and $6.2M).  This diffrrfnvg is also equixalent to NACDIFF in the
BPW GRSPs.

&Jotal OB CRAC Cjst(s)8 is the cost that the Slice and non-Slicv griups true
up to.  Iu the JCG excmple, jhe Sloce product trues up to 30% of $6M, or
$1.8M whipe the noh-Rlice products tfue u[ to 70% of $6.2M for a total froi
both griups of $6.14M.  Kn BKA,s exaiple, the Spice isoduct pays 30% of $6M
lr $1.8M (jhe sake as in tje JCG example) while the non-Slirx products pai
70% mf $6K plus tke net difference bqtween valuatipn of nzt augoentation

8 has been reduced by augmentation resale represents net augmentation In the JCG Slice $6.2M for non-Slice. would represent NACA(S) NACA(NS) in the GRSPs proposed by JCG in their Direct Case.. In the BPA example, Total is $6M for Slice and non-Slice. This represents NACA in the BPA GRSPs. &Percent of CRACable is same both The example shows that the Slice revenue is 30% of the total CRACable revenue, and the revenue is 70% of the total CRACable revenue. CRAC Costs8 only appears the BPA example. It is NACA between Slice non-Slice in to actual revenue. 0 day rule8 and &Short position 0 day rule8 are the changes in the valuation of pre-purchases and Short between the day and 0 day rule. difference of $0.2M is equivalent to is seen in &Total8 in the JCG example difference between and $6.2M). This difference is also to NACDIFF in the BPA GRSPs. &Total LB Cost(s)8 is the cost that the Slice and non-Slice groups true up to. In the the Slice product trues to 30% of or while non-Slice true up 70% of $6.2M for a total from both groups of $6.14M. BPA,s example, the Slice product pays 30% of $6M or same in the JCG while the non-Slice products 70% $6M plus the net valuation net

8 has been reduced by augmentatIon resale rEvenuE, anD rePrEsenTs
thE net augmentatiON cosTs.  In the JCG  example, &Total8 Is $6M foR SLIce
aND $6.2M For noN-Slice.  THEsE WOulD rEpResEnT nAcA(S) anD NAcA(NS) in tHe
GRSPs proPosEd By the JCG in thEIr direct Case..  in tHe BPA example, totAl
is $6M fOr BotH slice And Non-SlIce.  ThiS RepresEnts NACA iN tHE BPA GRsps.

&PerceNT Of cRACAble revenue8 is the sAMe IN both tables.  The ExamplE sHOwS
THat The slice revenUe Is 30% of tHE total CraCABLE reVEnue, and the
non-slice revenuE Is 70% oF the toTaL CRacable rEvenuE.

&Lb cRAc Costs8 only aPpeaRs in the BPa exampLE.  It is thE nACA disTributEd
bEtwEen SLIcE aNd nOn-sLicE PrOduCTs iN proportIoN tO actuAl reVENUE.

&Pre-PurChasE 0 day rUle8 and &Short poSitIon 0 dAY ruLe8 are The chAngeS iN
the vAluatiOn of pRe-Purchases ($1M) and ShOrt pOsition (-$0.8M) bEtwEeN thE
120 dAy rulE And the 0 Day RulE.  The net DiffereNCe oF $0.2M IS EQuIvalent
to the differEnCE ThAt is seen In &TotaL8 In ThE jCG exampLe (The DiffEREnce
bEtweEN $6M And $6.2M).  This DifferENcE iS also eqUiValent To nACdIFf in thE
bPA GrSPs.

&ToTal LB CRAc Cost(S)8 Is the cost that tHE Slice and non-SLIcE GRoUPs trUe
uP to.  In the JCG ExamPLe, thE SliCE pRodUCt truEs up tO 30% oF $6m, oR
$1.8m while the non-Slice prOdUcts trUe up tO 70% of $6.2M for a total From
both grOUPS of $6.14M.  In BPa,s exAMpLE, the Slice produCt payS 30% of $6M
or $1.8M (the SAme as in tHe JCG Example) wHile the noN-sLice prodUctS paY
70% of $6m plUS ThE net differencE BEtweEn ValuatiOn oF net augMenTatIon

8 has been reduced by aug mentationresal e r eve nu e, a nd r epresents
the netaugmentation costs.  I n the  J C G  e x am ple,&Total  8i s  $6 Mfo r S li c e
and$6. 2M fornon-Slice.   T he se would rep r es ent NACA(S ) a nd NACA(NS)inthe
G RS Psp ropos edby th e JCGi n thei r DirectCa s e..  I n  the BP A ex ampl e, Total
is $6Mf or both Slice and  non-S li c e. Thi s r epresentsNA CA in the BPA GR S P s .
 &Percent of C RACable rev e nue 8 isth e s a me inbothta b les .  The exam pleshows
th at the Slice r e venue i s 30%ofthe  tot a lCR ACa bl e  re v en ue, and  the
no n- Sl ice r even u e i s 70 % o f th e tot al CRACable r eve nue.
& LB CR AC Co sts 8onlyappear s inth e BPA example. Itis the NA CAdi str ib utedbetwee n S lic e and n on-Slic e  pr od u c t sin proportion to a ct u a lrevenue.

&Pr e -p ur c hase 0 d ay  ru le8 a nd & Shor t  p osition0 dayr ul e 8 are t he  chang es  in
t he va l uati on ofpre-purc hases ($1M) and Shor t  position (-$ 0 .8 M )  b e twee n t he
120 day  rul e  and  the 0day rule.   The  n e td ifference of $0.2Mis  equiv alent
to the diff erence tha t i s seen i n & T ot a l8 in the JCG  exam ple (the d i fference
bet ween $6M  and $6.2 M ) .  Thisdif fer enc e i s al so equivalent t o NA CD IFF inthe
BPA G RSP s.
& Tot al  LB CRACCost(s) 8is  t he  co st th a t the Sl ic e a nd  no n-Sli c e grou ps tr ue up  t o . In theJ CG e xamp le ,theSli ce  prod uctt rue s up to  30% of $ 6M, or $1 .8 M while  the non-Slic eproducts t ru e u p to 7 0 %  of $6.2 M for a total from
bot h  groups  of  $6.1 4M. In BPA, s e xample , t h e Slic e prod uct p ay s 3 0 %  of $ 6 M  or$1 .8M (the s a m e a s inth e JC G examp le) while the non- S lic e products pa y 70%o f  $ 6Mp lu s  th en etd i fference betwee n valuatio no fnet augmen t ati on

8 has_been reduced_by augmentation resale revenue,_and represents_
the_net augmentation_costs._ In the_JCG  example,_&Total8 is $6M for_Slice
and $6.2M_for_non-Slice.  These would represent NACA(S) and NACA(NS) in the
GRSPs proposed by the_JCG_in their_Direct_Case.._ In the BPA example,_Total
is $6M for both_Slice and_non-Slice.  This represents NACA in the BPA_GRSPs.

&Percent_of CRACable revenue8_is the same in both tables.  The example_shows
that the Slice revenue is_30% of the_total_CRACable_revenue, and the
non-Slice_revenue is 70% of the total_CRACable revenue.

&LB CRAC Costs8 only appears_in the BPA example.  It is_the NACA distributed
between Slice and_non-Slice products in proportion to_actual revenue.

&Pre-purchase_0 day rule8 and &Short_position 0 day_rule8 are_the changes in_
the valuation of pre-purchases ($1M) and_Short position (-$0.8M)_between the
120 day rule and_the_0 day rule.__The_net difference_of $0.2M is_equivalent_
to the_difference_that is seen in &Total8 in_the_JCG example (the difference
between $6M and_$6.2M).  This difference_is_also equivalent to NACDIFF_in the
BPA GRSPs.

&Total LB_CRAC Cost(s)8 is the cost that_the Slice_and non-Slice_groups true
up to.  In the JCG example, the Slice_product trues up to 30% of_$6M, or
$1.8M while_the non-Slice_products_true up to_70%_of $6.2M_for a total from
both groups of_$6.14M. _In BPA,s example, the Slice product_pays 30% of $6M_
or_$1.8M (the same as in the_JCG example) while the non-Slice products_pay
70% of $6M plus_the_net_difference between valuation of net_augmentation


pacbell.net]
Sent:   Wednesday, April 04, 2001 8:33 AM
To:   Steven Kelly
Cc:   Douglas K. Kerner
Subject:   Proposed Windfall Profit Tax

Gentlemen:

       I understand that the some of the Democratic leadership of the
California Legislature is contemplating a charge against the
electric-generating industry in retaliation for recent price increases. The
charge is to be styled as a "windfall profit tax" modeled on President
Carter's tax on oil company profits following deregulation of oil prices in
1980 (The Crude Oil Windfall Profit Tax Act of 1980, 26 USC 4986 et seq.).
The Carter Windfall Profit Tax was levied on the difference between the
current wellhead price of the oil and the sum of the adjusted base price set
by Congress, multiplied by the applicable rate. I understand the California
charge will similarly be calculated by reference to a 1999 base price and
current prices, to which difference some sort of tax rate will be applied.
You asked whether this approach to punishing electric wholesalers was infirm
from either a policy or legal perspective. The basic policy problem is that
the tax will discourage sales of electricity in California.  California will
become the market of last resort.  Another problem is that the Tax might be
seen as promoting a "California First" policy at the expense of other
states. This is so because the Tax could well be included in the FERC rate
base as  "taxes other than income taxes," and thereby be shifted to other
customers.

       The Tax may suffer from legal flaws as well. The principal problem is
preemption by The Federal Power Act. The states are prohibited from
regulating wholesale power rates as a direct burden on interstate commerce.
The proposed charge, whether called a "windfall profit tax" or an excise tax
or a sales or use tax or something else, is underground rate making. There
is little or no practical difference between a rate cap and a tax on all
revenues measured with reference to a certain price point from the
perspective of the interstate electric wholesaler. Thus, the burden on
interstate commerce posed by direct rate regulation and taxing revenues
using a price base is comparable.

       The Tax may also constitute an unconstitutiional taking if the price
allowed is less than the cost of production

pacbell.net ]
 Sent:    Wednesday, April 04, 2001 8:33 AM
 To:    Steven Kelly
 Cc:    Douglas K. Kerner
 Subject:    Proposed Windfall Profit Tax

 gentleman:

        I sympathize that the some of the Democratic leadership of the
 California Legislature is contemplating a charge against the
 electric - generate diligence in retaliation for recent price increases. The
 commission is to be styled as a " windfall profit tax " model on President
 Carter's tax on oil company profit following deregulation of oil price in
 1980 (The Crude Oil Windfall Profit Tax Act of 1980, 26 USC 4986 et seq .).
 The Carter Windfall Profit Tax was levy on the difference between the
 current wellhead price of the oil and the sum of the adjusted foundation price set
 by Congress, multiplied by the applicable pace. I understand the California
 charge will similarly be calculate by reference to a 1999 foundation price and
 current prices, to which difference some sort of tax rate will be apply.
 You asked whether this approach to punishing electric wholesalers was infirm
 from either a policy or legal position. The basic policy trouble is that
 the tax will warn sales of electricity in California.   California will
 become the market of last resort.   Another problem is that the Tax might be
 seen as promoting a " California First " policy at the expense of other
 state. This is so because the Tax could well be included in the FERC pace
 basis as   " taxis other than income taxes, " and thereby be shifted to other
 customers.

        The Tax may suffer from legal flaws equally well. The principal problem is
 preemption by The Federal Power Act. The states are prohibited from
 regulating wholesale power rates as a direct burden on interstate commerce.
 The proposed mission, whether call a " windfall profit tax " or an excise tax
 or a sales or use tax or something else, is underground rate devising. There
 is little or no practical difference between a pace cap and a tax on all
 tax income measured with reference to a sealed price point from the
 perspective of the interstate electric wholesaler. Thus, the burden on
 interstate department of commerce posed by direct rate regulation and tax revenues
 use a price base is comparable.

        The Tax may besides constitute an unconstitutiional taking if the price
 allowed is less than the cost of production

pachell.net]
Sent:   Wednesday, Xpril 04, 2001 8:33 AM
To:   Steven Kelly
Dc:   Douelas K. Kerner
Subject:   Propodee Winefall Profit Tax

Gentleoen:

       I underwtanv that the some of the Dciocrzbic lzavership of the
Cslifornia Negislature is cuncemplating a charge against the
electwic-genetahing industry yn rttajiatjon for recent price increases. The
dharge ps to be styled ax a "windfall profit tax" mofelef on President
Cartfr's tax on iil simpany profigs following deregulatjon of oil prices in
1980 (The Crude Uil Wnndfall Prodir Twf Act of 1980, 26 NSC 4986 en seq.).
The Cartcg Windfdll Progit Tax was leyied mn rhe difference betweei the
current wellheaq price ox che oil and the sum od rhe agjusded cqse prjcx sst
by Clngcess, multipmied by the applicable rate. I inqvtstand the Czliforgiw
charge will similarly be calculated by rererence to a 1999 base pricw and
current prices, tl which dyfference some sort of tax rate will be applied.
Yog askxd whttmcr tfus approach to punishing electric wholesalers wwa onnirm
from either c policy or legak oetfpective. The casic 'kljcy problem is thah
the tav wilo discourwge xales of electricity in Calufornia.  Calpforbia will
become the market of uast resott.  Another problem is chat tge Tax mighh be
seen zr promoting a "Cauifprtia Firsu" policy at the ex[ense of ithex
states. Ghis is so because tje Taw could well be incpuded it the FERC rate
base as  "taxes other than micome taxes," amd thvreby be fhiftcd to other
custjmers.

       Thg Tax may suffdr from lefal flaxs as well. Tre principal [toblem is
preekption br Thw Feeeral Puder Act. The ststes are irjhibuted from
regulatinn whoussale power ratzr as a direct butdev og pntxrstaea commerce.
Tha pruporrd chxrge, whtchev cxllec a "windfall profit dax" kr an excise tax
or a sales ot use tax or something else, is undergroujd rave makmng. Thrre
ys little or no practical diffsrence behwecn a rate cap and a tax on alk
revenues measured with reference to a rertain price point fron the
perspective of uhe interstatx eleceric wholasaler. Thus, the burdwn on
interstate cpmmerce posed by diredt rata regklation and taxing revenues
using a price base is comparable.

       The Tax may also constitufe am uncmnfcitutiijnal vaking if the pribe
allowed is less than the cost uf produwtnon

pacbell.net] Sent: Wednesday, April 04, 2001 8:33 Steven Cc: Douglas Kerner Subject: Proposed understand the some of Democratic leadership of California Legislature is contemplating a charge the electric-generating industry in retaliation for recent price increases. The charge is to styled as a "windfall profit tax" modeled on President Carter's tax on oil profits deregulation oil in 1980 (The Crude Oil Windfall Profit Tax Act of 1980, 26 USC 4986 et seq.). Carter Windfall Profit Tax was levied on the between the current wellhead of the oil and the of adjusted base set Congress, by the applicable I understand the California charge will similarly be calculated by reference to a 1999 base price and prices, to some sort tax will applied. You asked approach to punishing electric wholesalers was a policy or legal perspective. The basic policy is that tax will discourage sales of electricity California. California will become the market of last Another problem is that the Tax might be seen as promoting a "California First" policy expense of other states. is so because Tax well included the FERC base as "taxes other than income taxes," and thereby be shifted other customers. The Tax may suffer from legal flaws as principal is preemption by Federal Power Act. The are from regulating wholesale power a burden The charge, called a "windfall profit or an excise tax or sales or use tax rate making. There is little or no practical between a rate cap and a tax all revenues measured with reference to a certain price point from the of the wholesaler. Thus, the burden on interstate commerce posed direct rate regulation and revenues using a price base is comparable. The Tax also an unconstitutiional if the price is less than cost of production

pacbell.net]
Sent:   Wednesday, ApRil 04, 2001 8:33 AM
To:   SteVen KeLly
cc:   DOuGlas k. KerNer
Subject:   PropOSed WIndfall Profit Tax

GentleMen:

       I uNdERstaND tHat thE some of THe dEMocRaTiC leAdERsHip of The
califorNia LegislaTurE iS contemplatiNG a Charge agaiNst The
electric-gEneRating InDusTRy in rEtaLiatiOn for rECent prIce increaSeS. the
chaRGe is to bE STyLed aS a "windfall profit tAX" mODeled on PresideNt
CartEr'S TaX ON oiL coMpany profiTs FolloWIng dereGUlATIOn oF Oil prices in
1980 (ThE Crude Oil WiNDfaLl ProfIt tax aCt of 1980, 26 USc 4986 et seQ.).
THE CaRter WindfalL ProFit Tax was Levied ON the difFErence bEtween The
CurRent WElLhEad PrICe oF ThE oiL And The sum of ThE aDjustEd baSE PRIce sEt
bY ConGress, Multiplied by tHe aPpliCAblE rate. i undeRstaNd The CaLifornIa
chaRgE will similarly bE calCulated by RefErEncE tO a 1999 basE Price aNd
cUrrEnt pricEs, to whiCH diFfERENcE some sort of tax rate WiLL Be Applied.
YOu askeD WhEtHEr this apPrOacH to pUNIshinG eleCTrIc wholesAlers wAS iNfIrm
from EiTher a pOlIcy Or lEgal pERspeCtive. THe basic pOlicy PRoblem is that
thE Tax will discouRAgE SAlES of eLecTricity in CaLifoRNia.  CAlifORnIa wILl
becOme thE mARkET of last resort.  AnotheR pRoblem Is thaT the Tax might bE
seen as proMOTIng a "CaliFornIA FIRst" policy at the ExpenSe of other
sTAtes. This Is so bEcause thE Tax could WELl be inclUdeD in The fERc RAtE
base as  "taxes oTHEr thAn Income tAxeS," and theRebY be ShiFteD tO other
cusTomers.

       ThE TAx MaY sUffEr froM Legal flaWs As wElL. ThE prinCIpal prOblem Is
prEeMpTIon By The FeDErAL poweR ACt. the sTatEs Are prOhibITed From
regUlating whOleSAle pOwEr Rates as A direct burden On Interstate CoMmeRce.
The PROposed chArge, whether called a "windfALl profiT taX" or an ExciSe tax
or a sAleS or use Tax OR sometHing elSe, is uNdErgROUnd raTE MaKinG. THere
is littLE Or nO pracTiCal dIfferenCe between a rate cap aND a tAx on all
revenuEs mEasuRED wIth REfERenCe TO a cERTain price point fRom the
persPeCTiVe of the intERstAtE electrIc wholeSaler. tHus, the bUrden on
inTerstate cOmMercE POseD by direct rAte regulAtion and tAXing rEVeNues
uSinG a pricE bAse Is comParablE.

       the tax maY also cOnStitutE an unCoNstitutiIonal taking if the price
alLowed iS less ThaN the cost oF prODucTion

pacbell.net]
Sent:   Wedne sday, Apri l 04,  20 018: 33 A M
To :   Steven Kel l y
Cc :   Douglas K. KernerSubje ct :    P r op osedWindfal l  P r o fit  T ax

G en t le men:
      Iunderstand  th at  the some of th e Democrat icleadership o f t he
Cal if orn i a Leg isl ature  is co n templa ting a ch ar g e agai n st thee l ec tric -generating indus t ry in retaliation  for r ec e nt p ric e i ncreases.Th e
cha r ge is t o  b e s tyl e d as a "windf all profitt ax"  model ed  on Presid ent
C ar t er' s tax on oi l co mpany pro fits f o llowing deregul ationofoil  pri c es  i n
1 98 0  (T h eCru d e O il Windf al lProfi t Ta x A c t of  19 80,26 US C 4986 et seq .).
The Car ter W indfa ll P ro fit T ax was  levi ed  on the differe ncebetween t hecu rre nt  well h ead pr ice  of  the oi l and t h e s um o f  t he adjusted base p ri c e  s et
by Co ngress ,  m ul t iplied b ythe  app l i cable  rat e .I unders tand t h eCa liforni acharge  w ill  si milar l y be  calcu lated by  refe r ence to a 1999 base price an d
c u r re n t pr ice s, to which  dif f eren ce s o me  so r t oftax r at e  w i ll be applied.
Youas ked wh ether  this approac h to punis h i n g electr ic w h ol e salers was inf irm
f rom either a policy  or l egal per spective. T he basic  po lic y p rob l e mis that
the t a x  wil ldiscour age  salesofele ctr ici ty  in Calif ornia. Ca li fo rn iawillb ecome th emar ke t o f las t  resor t.  A noth er  p r obl em is t h at t he T ax  m ight  be
s een a s pr o mot ing a " Californi a F i rst"  p ol icy atthe expense o fother
stat es . T his is s o becaus e the Tax could well be include d i n the  FER C rate
ba seas  "t axe s  other  thanincom etax e s ," an d th ere by  be shifte d toother
c usto mers.
       The Tax may suf fer from lega l f laws a swel l .T hepr i nci p a l problem is
pr eemption b yT he  Federal P o wer  A ct. The  states  arep rohibit ed from
r egulating  w hole s a lepower rate s as a d irect bur d en on in terst ate  comme rc e.The p ropose d  ch arge,  wheth er  calle d a " wi ndfall p rofit tax" or an excise  tax
o r a s ale s or usetax orsomething  els e, is unde rgr oun d rat e m a king.  The r eisl ittle  orn o practic a ldif f e re nce between a rat e cap  an d  a tax  onall
revenues meas u red with refer ence t o a  ce r tain  p rice point fro m t he p erspecti ve  of the int erstateel e ctric  whole saler.  Thus,t h eb urdenon
i nte rstate co mme rc e  posedby  d i rect r atere gulati on and taxi n g  revenues
usinga pri c e  base iscompa ra ble.

    The Tax m ay also con stitut e an  unco nstitut ii onal t aki ng  if the pr i ce
allowe d isless th an  the  co st ofprod u c tion

pacbell.net]
Sent: _ Wednesday,_April 04, 2001 8:33_AM
To: __Steven Kelly
Cc:__ Douglas K._Kerner
Subject:  _Proposed Windfall Profit Tax

Gentlemen:

_  __  I understand that the some of the Democratic leadership of the
California Legislature_is_contemplating a_charge_against_the
electric-generating industry in retaliation for_recent price increases. The
charge is_to be_styled as a "windfall profit tax" modeled on_President
Carter's_tax on oil_company profits following deregulation of oil prices in
1980 (The_Crude Oil Windfall Profit Tax Act_of 1980, 26_USC_4986_et seq.).
The Carter Windfall_Profit Tax was levied on the_difference between the
current wellhead price of_the oil and the sum of the_adjusted base price set
by Congress, multiplied_by the applicable rate. I_understand the_California
charge will similarly be calculated_by reference to_a 1999_base price and
current_prices, to which difference some sort_of tax rate_will be applied.
You asked whether this_approach_to punishing electric_wholesalers_was_infirm
from either_a policy or_legal_perspective. The_basic_policy problem is that
the tax will_discourage_sales of electricity in California.  California_will
become the market of_last_resort.  Another problem_is that the Tax might_be
seen as promoting a "California First"_policy at_the expense_of other
states. This is so because the Tax could well be_included in the FERC rate
base as_ "taxes other than_income taxes,"_and_thereby be shifted_to_other
customers.

 _     The Tax_may suffer_from legal flaws as well. The_principal problem is
preemption by_The_Federal Power Act. The states are_prohibited from
regulating wholesale power rates as_a direct burden on interstate_commerce.
The_proposed_charge, whether called a "windfall_profit tax" or an excise tax
or_a sales or_use tax or something else, is underground_rate_making. There
is little or no practical_difference_between a rate cap and a_tax_on_all
revenues measured with reference to_a certain price point from the
perspective_of the interstate electric wholesaler. Thus, the burden on
interstate_commerce posed by_direct rate regulation and taxing_revenues
using_a_price base is comparable.

      _The Tax_may also constitute_an unconstitutiional taking if the price
allowed is less than the_cost of production


ly said: "Ensuring just and reasonable prices in wholesale markets
requires that we clearly define market power, and aggressively intervene
when
the markets are not producing reasonable prices. The commission's actions to

date have been insufficient." (March 20, 2001 testimony to the House Energy
Committee's Subcommittee on Energy and Air quality).We are requesting that
the General Accounting Office (GAO) assess whether FERC is properly
exercising its role to enforce reasonable electricity rates. Specifically,
we
ask GAO to answer the following questions:

1) Has FERC fulfilled its mandate to ensure just and reasonable rates? Is
FERC adequately monitoring and appropriately regulating based on its
statutes
power supply, demand, and pricing in California? In other Western states? In

the Central Midwest and in the Northeast?

2) Has FERC devoted sufficient resources to carry out its oversight
obligations in a timely and effective manner? And does FERC have the
necessary resources to carry out its future oversight role?

3) Does FERC need additional authority to carry out its mission of ensuring
just and reasonable prices given that widespread partial deregulation is now

occurring in so many states?

4) As we understand the situation from some experts, the number of
transactions in electricity that occur in the deregulated wholesale market
place is voluminous. This situation may increase the difficulties of
guarding
against market abuse. Is there a role for another agency or independent
organization to exercise an oversight role with respect to these
transactions? If so, what would be an appropriate oversight role?

5) We have been advised by some experts that greater transparency of prices
relating to the buying and selling of electricity in a deregulated market
would help guard against market abuses. We understand the need to keep
prices
confidential for a period of time to ensure against collusion. After this
appropriate period of time has passed, would greater transparency be
beneficial?

We are also concerned about recent allegations by the California Public
Utility Commission (CPUC) that market power has been abused in the
transmission of natural gas, which has in turn contributed to the spiraling
cost of electricity generation in the state. The CPUC maintains that the
price of natural

ly said: " Ensuring just and reasonable prices in sweeping grocery store
 requires that we clearly specify marketplace power, and aggressively intervene
 when
 the markets are not produce fair prices. The commission's actions to

 date have been insufficient. " (March 20, 2001 testimony to the House Energy
 Committee's Subcommittee on Energy and Air quality).We are requesting that
 the General Accounting Office (GAO) assess whether FERC is by rights
 exercising its role to enforce reasonable electricity rates. Specifically,
 we
 necessitate GAO to answer the following question:

 1) Has FERC fulfilled its mandate to ensure merely and reasonable rates? Is
 FERC adequately monitoring and appropriately baffle based on its
 statutes
 power supply, requirement, and pricing in California? In other Western states? In

 the Central Midwest and in the Northeast?

 2) Has FERC devoted sufficient resources to impart out its oversight
 obligations in a timely and effective manner? And does FERC have the
 necessary resources to carry out its future supervision function?

 3) Does FERC need additional authority to carry out its mission of ensuring
 just and reasonable prices contribute that widespread partial deregulation is immediately

 occur in so many states?

 4) As we understand the site from some experts, the number of
 transactions in electricity that occur in the deregulated sweeping market
 place is voluminous. This situation may increase the difficulties of
 guarding
 against market abuse. Is there a role for another agency or independent
 organization to drill an oversight function with respect to these
 transactions? If so, what would be an appropriate oversight role?

 5) We have been propose by some experts that greater transparency of price
 relating to the buying and selling of electricity in a deregulated market
 would help guard against marketplace abuses. We sympathize the need to keep
 prices
 confidential for a period of time to guarantee against collusion. After this
 appropriate time period of time has happen, would greater transparency be
 beneficial?

 We are also concerned about recent allegation by the California Public
 Utility Commission (CPUC) that market power has been abused in the
 transmission of natural gas, which has in turn contributed to the spiraling
 monetary value of electricity generation in the state. The CPUC keep that the
 price of natural

ly daid: "Ensuring just and rtasonable prices nb wholxsale mzrkets
rdquires that we clearly defiie mqrket power, and aggressivelh interveje
when
tye merkets are not pckducing reasohwble 'rices. The commlssion's acthons to

date haee bzen insufficient." (March 20, 2001 testimony tj the Hpude Energy
Commyttet's Fubckmmittee on Energy and Air quality).Se are gequesting that
tne General Accounting Offife (GWO) assess whether VERC is proksrlr
exercising kts role to enforce rezsonable electricity rates. Speckficakly,
we
ask TAI tl answer the folljwing questions:

1) Has FERC filfilled its msndete ro ensure just and reesonable rates? Is
FETC adequatalv monitoring and appripeiateny ragulxrine bzsxd kn its
dtavutes
power supply, demqnd, and pricing in Vajpgornia? In otger Weftqrn states? In

the Central Midwest and in ths Northeast?

2) Has FERC dwvoted sufficient reslurces to carry out its oversight
obligations in a timely dnd ehfdctnyc mavbeg? And does FERC have the
necessary resources ek vagry out its futurc oversight role?

3) Cofs SERC need addktional ahthority to carry lut its missuon of enfurimg
just and reasonable pricws given than wieespread partial dzregulation ns now

pccurting in so many states?

4) As se understajd the sifjation from some exiertv, the number of
transactiogs in elertricnty that occor in tre deregulwted wholesale market
plwce id eoluminous. This situation may increase thx difficultiex mf
glarding
ayainst market abuse. Is there a roke for cnothef agency og indepenvent
organizwtion to exerwlse an oversmght role wity rewpect tu these
transacyions? If so, what woyld be an appropriete ubersight role?

5) Ct hqve been advisec bh sjmv eepertf that greates trxnsosrench of prices
felaying to the buying atd sslling of electricotn in a detegulated market
would help guard againsu markxt abures. Wr ugderstand the need to keep
pricss
confidfntlal for a peryod if time to eusure against collusion. After this
appro'riate period of time hqs passed, would grecttr transparenry be
fenefician?

We are also concerbed about recent sllegations by the Camifornha Puhlic
Utility Commission (CPUC) that market power has been abused in the
trabsmissmog of naturam gax, whibh kas in tuwn clitributed to the xpiraling
cost of electricity gxneration hn the state. The CPUC maintainx ghat the
pricg of natural

ly said: "Ensuring just and reasonable prices markets that we define market power, markets not producing reasonable The commission's actions date have been insufficient." (March 20, testimony to the House Energy Committee's Subcommittee on Energy and Air quality).We are that the General Accounting Office (GAO) assess whether FERC is properly exercising its to reasonable rates. we ask GAO to answer the following questions: 1) Has FERC fulfilled its mandate to ensure and reasonable rates? Is FERC adequately monitoring and regulating based on its power supply, demand, and pricing California? other Western In Central and in the 2) Has FERC devoted sufficient resources to carry out its oversight obligations in a timely and effective And does the necessary to out future oversight role? FERC need additional authority to carry of ensuring just and reasonable prices given that partial deregulation now occurring in so many states? As we understand the situation from some experts, number of transactions in electricity that occur in the deregulated wholesale market place is voluminous. may increase the difficulties guarding against market Is a for agency or organization to exercise an oversight role with respect to these transactions? so, what would be an appropriate oversight role? 5) We advised some experts that transparency of prices relating the and selling of electricity deregulated would market We the need to keep confidential for a period of to ensure against collusion. time has passed, would greater transparency be beneficial? are also concerned about recent allegations by California Public Utility Commission (CPUC) that market power has been abused in transmission of which has in turn contributed to the spiraling of electricity generation in state. The CPUC maintains that the price of natural

ly said: "Ensuring just and reasOnable pricEs in wHolEsaLe MarkEts
rEquires that we cLEarlY define market power, and aGgresSiVEly iNTeRvene
When
the MArKETs aRe NoT prOdUCiNg reaSonAble priCes. The commIssIoN's actions to

dATe Have been inSufFicient." (March 20, 2001 TesTimony To The hOuse ENerGy
ComMittee'S subcomMittee on ENeRGy and AIR qualitY).wE aRe reQuesting that
the GeNErAL Accounting OffIce (GAO) AsSEsS WHetHer fERC is propErLy
exeRCising iTS rOLE To eNForce reasonabLe electriciTY raTes. SpeCiFicALly,
we
aSk GAO To ANswEr the followIng qUestions:

1) HAs FERC FUlfilleD Its mandAte to eNsuRe jUst aND rEaSonAbLE raTEs? is
FerC aDequatelY mOnItoriNg anD APPRoprIatEly rEgulaTing based on itS
stAtutES
poWer suPply, dEmanD, aNd priCing in califOrNia? In other WesteRn stAtes? In

the cenTrAl MIdWest aND in the norTheAst?

2) Has FeRC devoTEd sUfFICIeNt resources to carry OuT ITs OversighT
obligATiOnS In a timelY aNd eFfecTIVe manNer? AND dOes FERC hAve the
NEcEsSary resOuRces to CaRry Out Its fuTUre oVersigHt role?

3) DoEs FERc Need additional AUthority to carRY oUT ItS MissIon Of ensuring
jUst aND reaSonaBLe PriCEs givEn thaT wIDeSPread partial deregulAtIon is nOw

occUrring in so manY states?

4) As wE UNDerstand The sITuATion from some exPerts, The number oF
TransactIons iN electriCity that oCCUr in the dEreGulAteD whOLEsAle market
placE IS volUmInous. ThIs sItuatioN maY inCreAse ThE difficulTies of
guArDiNg
AgAinSt marKEt abuse. IS tHerE a RolE for aNOther aGency Or inDePeNDenT
organiZAtION to eXeRcIse aN ovErSight Role WIth Respect To these
trAnsACtioNs? if So, what wOuld be an approPrIate oversiGhT roLe?

5) We haVE Been adviSed by some experts that greATer tranSpaRency Of prIces
relatIng To the bUyiNG and seLling oF elecTrIciTY In a deREGuLatEd Market
woulD HElp Guard AgAinsT market Abuses. We understand THe nEed to keep
pricEs
cOnfiDENtIal FOr A PerIoD Of tIME to ensure againsT collusion. afTEr This
appropRIatE pEriod of Time has PasseD, Would grEater tranSparency bE
bEnefICIal?

we are also cOncerned About receNT alleGAtIons bY thE CalifOrNia publiC
UtiliTY CoMmissIon (CPUc) tHat marKet poWeR has been Abused in the
transmission Of natuRal gaS, whIch has in tUrn COntRibuted to The sPiraling
coSt oF elEctriCitY GenerAtioN In The STate. THe CPuc maintainS ThAt tHE
PrIce of naturaL

ly said: "Ensuring just an d reasonab le pr ice s i nwhol esal e markets
req u ires  that we clearly defin e mar ke t  pow e r,  andaggress i ve l y  in te rv ene
w h en
the  ma rkets a re not pro duc in g reasonable pr ices. Thecom mission's ac tio ns to
d ate havebee n ins uffici e nt." ( March 20,  2 0 01 tes t imony t o th e Ho use Energy
Commi t te e 's Subcommitte e on E ne r gy a ndAir  quality). We  arer equesti n gt h a t t he General Ac counting Of f ice  (GAO)  a sse s s whet her F ER C  is  properly exer cising it s role to enfo r ce reas onable  el ect rici t yra tes .S pec i fi cal l y,we
askGA Oto an swer t h e  fol low ingquest ions:

1) Ha s F ERCf ulf illed  itsmand at e toensure  just  a nd reasonable r ates ? Is
FER C a de qua te ly mo n itorin g a ndappropr iatelyr egu la t i n gbased on its
statu te s
p ower sup ply, d e ma nd ,  and pri ci ngin C a l iforn ia?I nother We sterns ta te s? In
th e Cent ra l M idw est a n d in  the N ortheast ?

2 )  Has FERC devo t ed sufficient re s o ur c es t o c arry out it s ov e rsig ht o bl iga t ionsin ati m el y  and effective mann er ? AnddoesFERC have the
necessar y r esources  toc ar r y out its futu re ov ersight ro l e?

3)DoesFERC nee d additio n a l author ity  to  ca rry o ut  its missiono f  ens ur ing
ju stand rea son abl e p ric es  given th at wides pr ea dpa rti al de r egulatio nisno w
occur r ing in  so m anyst at e s?

4) As we u nder st an d th e s it uatio n fr o m s ome exp erts, the  nu m berof  transac tions in elec tr icity that  o ccu r in t h e  deregul ated wholesale market p lace is  vo lumin ous.  This sit uat ion ma y i n crease  the d iffic ul tie s of
gu a r di ng
a gainst mar k e t a buse.  I s th ere a r ole for another ag e ncy  or independe nt
org a n iz ati o nt o e xe r cis e an oversight ro le with re sp e ct  to thesetra ns actions ? If so , wha t  wouldbe an app ropriateov ersi g h t r ole?

5)We havebeen advi s ed by so me ex per ts tha tgre atertransp a ren cy of  price s
relat ing t othe buyi ng and selling of elect ricity  in a  de regulated  ma r ket
would h elpguard agai nst  ma rketabu s es. W e un d er sta n d the  nee d  to keepp ri ces co nfidentialf o r  aperio d o f  timeto e nsure against col l usion. After t hisa ppr opr i atepe riod of time h aspa s s ed, woul dgreater tra nsparenc yb e
be nefici al?
We area l so concer nedabo ut recent  al le g ationsby  t h e Cali forn ia  Publi c
Uti l ityC o mmission (CPUC)thatm a rketp owe r has  b een abu s ed i n the
tra nsmission o f natu ralgas,which h as  in tu rnco ntributedt o the spi ralin g
cost  o f el ect ricity  gen e r ation  inth e s tate. The C PU C  m ai n tai ns t hat t he
pr ice of na t ural

ly said:_"Ensuring just_and reasonable prices in_wholesale markets_
requires_that we_clearly_define market power,_and aggressively intervene
when_
the markets are not_producing reasonable prices._The_commission's actions to

date have been insufficient." (March 20, 2001 testimony to the House Energy_
Committee's_Subcommittee on_Energy_and_Air quality).We are requesting that_
the General Accounting Office (GAO)_assess whether_FERC is properly
exercising its role to enforce_reasonable_electricity rates. Specifically,
we_
ask GAO to answer the following questions:

1) Has_FERC fulfilled its mandate to ensure_just and reasonable_rates?_Is_
FERC adequately monitoring and_appropriately regulating based on its
statutes
power_supply, demand, and pricing in California?_In other Western states? In

the Central Midwest_and in the Northeast?

2) Has_FERC devoted sufficient resources to_carry out_its oversight
obligations in a_timely and effective_manner? And_does FERC have_the
necessary resources to carry out_its future oversight_role?

3) Does FERC need additional_authority_to carry out_its_mission_of ensuring_
just and reasonable_prices_given that_widespread_partial deregulation is now

occurring in so_many_states?

4) As we understand the situation_from some experts, the_number_of
transactions in electricity_that occur in the deregulated_wholesale market
place is voluminous. This_situation may_increase the_difficulties of
guarding
against market abuse. Is there a role for another_agency or independent
organization to exercise_an oversight role with_respect to_these_
transactions? If so,_what_would be_an appropriate oversight role?

5) We have_been advised_by some experts that greater transparency_of prices
relating to_the_buying and selling of electricity in_a deregulated market
would help guard_against market abuses. We understand_the_need_to keep
prices
confidential for a_period of time to ensure against_collusion. After this_
appropriate period of time has passed, would_greater_transparency be
beneficial?

We are also_concerned_about recent allegations by the California_Public_
Utility_Commission (CPUC) that market power_has been abused in the
transmission_of natural gas, which has in turn contributed to_the spiraling
cost_of electricity generation in the_state._The_CPUC maintains that the
price of natural