 you'll be sure to
score a hit when V-Day arrives on your doorstep.

To learn more about each item listed below, simply click on its name.
_____________________________________________________________________

Great Wines and Gifts

1998 Ivan Tamas Zinfandel, Livermore Valley, California, $8.95
An outstanding, fruit-filled Zinfandel produced from old-vine grapes
grown in Northern California's historic Livermore Valley. Intense
raspberry and dark cherry fruit flavors with black pepper aromas;
medium-bodied, with nice depth and concentration.

1997 Adella Zinfandel, Napa Valley, California, $14.99
A big mouthful of a Napa Zin that still offers supple smoothness and
easy drinkability. The addition of Sangiovese and Syrah gives the
wine extra body, depth, and flavor. A perfectly targeted Zinfandel
that hits the palate right in the bull's-eye.

Port and Chocolate Cigars, $30.00
This soothing tawny port from Tuke Holdsworth is a great way to take
the chill out of a cool winter evening. Paired with luscious
chocolate cigars, it inspires warm feelings all through the winter.
Packaged on a sparkling silver plated bottle coaster.

Romantic Duet, $35.00
When it comes to attractive matches, this international couple - a
rich, toe-tingling French bubbly (originally blended for Czar
Nicholas II of Russia) and a graceful, supple Napa Valley Merlot - is
not only glamorous, but also harmonious.

1997 Sonora TC Vineyard, 'Old Vine Zinfandel', Sierra
Foothills, $24.00
Big and foward in style with tons of intense fruit and firm tannins.
Classic Sierra Foothills Zinfandel from a 90 year old vineyard. If
Sonora's two Zins were singing in the choir, "TC Vineyard" would be
singing baritone and "Story Vineyard" tenor.

1999 Left Bank Macon-Ige Vieilles Vignes, Burgundy, France, $12.00
Clean and direct, this friendly wine is sure to please anyone tired

you'll be sure to
 score a hit when V - Day arrives on your doorsill.

 To determine more about each item listed downstairs, just click on its name.
 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

 Great Wines and Gifts

 1998 Ivan Tamas Zinfandel, Livermore Valley, California, $ 8.95
 An outstanding, yield - filled Zinfandel produced from old - vine grape
 grown in Northern California's historic Livermore Valley. Intense
 boo and dark cherry fruit flavors with bootleg pepper aromas;
 average - bodied, with nice astuteness and assiduity.

 1997 Adella Zinfandel, Napa Valley, California, $ 14.99
 A big mouthful of a Napa Zin that still offers limber smoothness and
 easy drinkability. The addition of Sangiovese and Syrah gives the
 wine excess body, astuteness, and flavor. A perfectly targeted Zinfandel
 that hits the palate mighty in the bull's - eye.

 Port and Chocolate Cigars, $ 30.00
 This soothing tawny port from Tuke Holdsworth is a great way to drive
 the chill out of a cool winter evening. Paired with luscious
 chocolate cigars, it inspires warm feelings all through the winter.
 Packaged on a sparkling ash grey plated bottle coaster.

 Romantic Duet, $ 35.00
 When it comes to attractive couple, this external couple - a
 ample, toe - tingling French bubbly (primitively blended for Czar
 Nicholas II of Russia) and a graceful, supple Napa Valley Merlot - is
 not only glamorous, but besides harmonious.

 1997 Sonora TC Vineyard,' Old Vine Zinfandel', Sierra
 Foothills, $ 24.00
 Big and foward in style with tons of intense fruit and firm tannins.
 Classic Sierra Foothills Zinfandel from a 90 year old vineyard. If
 Sonora's two Zins were singing in the choir, " TC Vineyard " would be
 singing baritone and " Story Vineyard " tenor.

 1999 Left Bank Macon - Ige Vieilles Vignes, Burgundy, France, $ 12.00
 uninfected and direct, this friendly wine is indisputable to please anyone tired

 yok'll be sure to
score a hlt when V-Day arrnces on your soorstep.

To learn more about each itxm lusted below, simply click on its name.
_____________________________________________________________________

Great Wunes qnd Gifts

1998 Mban Tamas Zinrwnden, Livermore Valkey, Califosnia, $8.95
An outstatdkny, fruit-filled Zinfandel produced froi old-vime grapes
grown yn Npwthedn California's historic Livermore Balley. Pntense
raspberry and dark cherry fruit flagors with black pepper aromas;
meduum-bjeied, with nize depth and concentrajion.

1997 Adella Zinfandel, Napa Valldy, Cakifornia, $14.99
A bug lmuthful of e Napa Zin that stlkl offars suplle smoothness anv
eawy drinkability. The avdition of Sangiovesg and Syrav yives the
wine extra voey, dekth, atd fuqvof. A pxrfsctly harjeted Zinfahdel
that huts the palate righu ig the bull's-eye.

Port wnq Chocolate Cigars, $30.00
This soothing tawny kort rrom Tuke Holdsworth is a great way to take
jhe chill jut of a cool winter evening. Paired with luscious
chockuatt glgarr, ih inspires warm feelings all through the wintqd.
Kaclaged on a spavkling silver platrd bpjtle coaster.

Rumantie Dhet, $35.00
When it comes ho attrwctivw matches, thix international couple - a
ruch, toe-tinglpng Drench bubbly (orignnally blendzd for Czar
Nicholas II of Russia) cnd a fraceful, suople Napa Xalley Merlot - ir
npt only glamorous, but also hwrmonious.

1997 Souora TC Xineiard, 'Olq Vine Zinvandel', Sierra
Foothills, $24.00
Hig aud fofard in stjle with tons of intense fruit eid firm tannims.
Cldssic Sizrra Fpothills Zinfwndel from a 90 iear old rineyafd. If
Sonoga's two Zmns were sinding in the cvlir, "TC Vineyerd" would be
wingung barkgone and "Story Vineyard" tenor.

1999 Ledt Bank Macon-Ige Vleillgs Vignes, Burgundv, Drance, $12.00
Clean anc dkrest, tiis fwhendly wine hs sjre yo pldase anyone girec

you'll be sure to score a hit arrives your doorstep. learn more about click its name. _____________________________________________________________________ Wines and Gifts Ivan Tamas Zinfandel, Livermore Valley, California, An outstanding, fruit-filled Zinfandel produced from old-vine grapes grown in Northern California's historic Valley. Intense raspberry and dark cherry fruit flavors with black pepper aromas; medium-bodied, nice and 1997 Zinfandel, Napa Valley, California, $14.99 A big mouthful of a Napa Zin that still offers supple and easy drinkability. The addition of Sangiovese and gives the wine extra depth, and flavor. A perfectly Zinfandel hits the right the Port and Chocolate $30.00 This soothing tawny port from Tuke Holdsworth is a great way to take the chill out a cool Paired with chocolate it warm feelings all winter. Packaged on a sparkling silver Romantic Duet, $35.00 When it comes to attractive this international - a rich, toe-tingling French bubbly blended for Czar Nicholas II of Russia) and graceful, supple Napa Valley Merlot - is not only glamorous, but also harmonious. 1997 Sonora 'Old Vine Zinfandel', Sierra $24.00 Big and in with of fruit and tannins. Classic Sierra Foothills Zinfandel from a 90 year old vineyard. Sonora's two Zins were singing in the choir, "TC Vineyard" singing and "Story Vineyard" 1999 Left Bank Macon-Ige Vignes, France, $12.00 Clean and friendly is anyone

 you'll be sure to
score a hit wheN V-Day arrivEs on yOur DooRsTep.

TO leaRn more about eacH Item Listed below, simply click On its NaME.
_____________________________________________________________________

GreAT WInes aNd Gifts

1998 iVaN tAmaS ZInFanDeL, liVermoRe VAlley, CaLifornia, $8.95
An OutStAnding, fruit-fILlEd ZinfandeL prOduced from olD-viNe grapEs
GroWN in NoRthErn CaLifornIA's histOric LiverMoRE ValleY. intense
RASpBerrY and dark cherry fruIT fLAvors with black Pepper ArOMaS;
MEdiUm-bOdied, with nIcE deptH And concENtRATIon.

1997 aDella ZinfandeL, Napa Valley, cAliFornia, $14.99
a bIg mOUthful Of a NaPa zIn tHat still offErs sUpple smooThness ANd
easy dRInkabilIty. The AddItiOn of sAnGiOveSe ANd SYRaH giVEs tHe
wine exTrA bOdy, dePth, aND FLAvor. a peRfecTly taRgeted ZinfandEl
tHat hITs tHe palAte riGht iN tHe bulL's-eye.

POrt anD CHocolate Cigars, $30.00
THis sOothing taWny PoRt fRoM Tuke hOldswoRth Is a Great waY to take
THe cHiLL OUt Of a cool winter eveniNg. pAIrEd with luScious
CHoCoLAte cigarS, iT inSpirES Warm fEeliNGs All throuGh the wINtEr.
packageD oN a sparKlIng SilVer plATed bOttle cOaster.

RoMantiC duet, $35.00
When it comeS To attractive mATcHES, tHIs inTerNational couPle - a
RIch, tOe-tiNGlIng fRench BubblY (oRIgINally blended for Czar
niCholas iI of RUssia) and a gracEful, supple nAPA Valley MErloT - Is
NOt only glamorouS, but aLso harmoniOUs.

1997 Sonora tC VinEyard, 'Old vine ZinfaNDEl', Sierra
fooThiLls, $24.00
big AND fOward in style wITH tonS oF intensE frUit and fIrm TanNinS.
ClAsSic Sierra foothillS ZInFaNdEl fRom a 90 yEAr old vinEyArd. if
sonOra's tWO Zins wEre siNginG iN tHE chOir, "TC ViNEyARD" wouLd Be
SingIng BaRitonE and "sTorY VineyaRd" tenor.

1999 LeFt BANk MaCoN-IGe VieilLes Vignes, BurgUnDy, France, $12.00
ClEaN anD direcT, THis frienDly wine is sure to please anYOne tireD

 you'll be sure to
scorea hit when  V-Da y a rri ve s on  you r doorstep.
T o le arn more about each it em li st e d be l ow , sim ply cli c ko n  it sna me.
_ _ __ _____ ___ _______ __________ ___ __ ____________ _ __ __________ ___ _______

Gr eat  Wines  a ndG ifts
19 98 Iv an Tam a s Zinf andel, Li ve r more V a lley, C a l if orni a, $8.95
An outst a nd i ng, fruit-fill ed Zin fa n de l pro duc ed from ol d- vineg rapes g ro w n inN orthern Calif ornia's his t ori c Live rm ore Valley . Int en s e raspberry a nd d ark cherr y frui t  flavor s  with b lack p epp erarom a s;  med iu m -bo d ie d,w ith  nice de pt hand c once n t r a tion .
199 7 Ade lla Zinfandel , N apaV all ey, C alifo rnia ,$14.9 9
A bi g mou th ful of a Napa Z in t hat still  of fe rssu pples moothn ess  an d
easy  drinka b ili ty . T he  addition of Sangi ov e s eand Syra h give s  t he
wine ex tr a b ody, d epth,  and fl avor. Aperfec t ly  t argeted  Z infand el
t hat  hits thepalate  right i n the bull's-eye.
P ort and Choco l at e Ci g ars,  $3 0.00
This s ooth i ng t awny po rtf rom T uke H ol d sw o rth is a great wayto  take
thechill out ofa cool win t e r  evening . Pa i re d  with luscious
cho colate cig a rs, it i nspir es warmfeelingsa l l throug h t hewin ter .
P ackaged on as p arkl in g silve r p lated b ott lecoa ste r.

Romant ic Duet,  $ 35 .0 0Whe n itc omes toat tra ct ive  matc h es, th is in tern at io n alcouple-  a rich ,to e-ti ngl in g Fre nchb ubb ly (ori ginally b len d ed f or  C zar
Ni cholas II ofRu ssia) andagra ceful, s upple Na pa Valley Merlot - is n ot only  gl amoro us,but alsohar moniou s.
1997Sonora  TC V in eya r d , 'Ol d Vi neZi nfandel',S i err a
Fo ot hill s, $24. 00
Big and fowardi n s tyle with ton s o f in t e ns e f r ui t  an df irm t annins.
Classi c Sierra F oo t hi lls Zinfan d elfr om a 90  year o ld vi n eyard.If
Sonor a's two Z in s we r e  si nging in t he choir , "TC Vin e yard" wo uld b e singin gbar itone  and " S tor y Vin eyard"  t enor.

199 9Left Ban k Macon-Ige Vieilles Vi gnes,Burgu ndy , France,  $1 2 .00
Clean an d di rect, this  fr ien dly w ine is su re t o  p lea s e any onet ired

 you'll_be sure_to
score a hit_when V-Day_arrives_on your_doorstep._

To learn more_about each item_listed below, simply click_on its name.
______________________________________________________________________

Great_Wines and Gifts

1998 Ivan Tamas Zinfandel, Livermore Valley, California, $8.95
An outstanding, fruit-filled Zinfandel produced_from_old-vine grapes_
grown_in_Northern California's historic Livermore Valley._Intense
raspberry and dark cherry_fruit flavors_with black pepper aromas;
medium-bodied, with nice depth_and_concentration.

1997 Adella_Zinfandel, Napa Valley, California, $14.99
A big mouthful of a_Napa Zin that still offers supple_smoothness and
easy_drinkability._The_addition of Sangiovese and_Syrah gives the
wine extra body,_depth, and flavor. A perfectly targeted_Zinfandel
that hits the palate right in_the bull's-eye.

Port and Chocolate Cigars,_$30.00
This soothing tawny port from_Tuke Holdsworth_is a great way to_take
the chill_out of_a cool winter_evening. Paired with luscious
chocolate cigars,_it inspires warm_feelings all through the winter.
Packaged_on_a sparkling silver_plated_bottle_coaster.

Romantic_Duet, $35.00
When it_comes_to attractive_matches,_this international couple - a
rich,_toe-tingling_French bubbly (originally blended for Czar
Nicholas_II of Russia) and_a_graceful, supple Napa Valley_Merlot - is
not only_glamorous, but also harmonious.

1997 Sonora_TC Vineyard,_'Old Vine_Zinfandel', Sierra
Foothills, $24.00
Big and foward in style with tons of_intense fruit and firm tannins.
Classic_Sierra Foothills Zinfandel from_a 90_year_old vineyard. If_
Sonora's_two Zins_were singing in the choir, "TC Vineyard"_would be_
singing baritone and "Story Vineyard" tenor._

1999 Left Bank Macon-Ige_Vieilles_Vignes, Burgundy, France, $12.00
Clean and direct,_this friendly wine is sure to_please anyone tired


.com'
Subject: Sue's Retort to SCE's Premise
Importance: High

I don't agree Edison's premise -- that "direct access customers contributed just as much to SCE's procurement costs undercollection as bundled service customers." We need to make clear that we don't buy in to their rhetoric.

Here's my reasoning.

DA Customers are completely different from bundled customers. SCE had to buy power to serve the bundled load.  SCE did not buy power for DA customers.  SCE's purchases of the power to serve the bundled load coupled with high wholesale prices and an inability to raise rates was the direct reason for the undercollection. I can make the argument that the undercollection is SOLELY related to BUNDLED SERVICE.

There are two big reasons that back me up: AB 1890 and Top-down rates.  I will explain.  The utilities got what they wanted out of AB 1890 -- payments of $30 plus billion in so-called stranded costs and a real delay in any competitive retail market until their costs were paid off.  One of the tradeoffs, however, was that the utilities were at risk FOR HIGH PRICES in the WHOLESALE MARKET.  Everyone understood that if there were high gas prices or bad hydro years, the utilities would be squeezed and not collect their billions by the 3/31/01 deadline. That's the risk they agreed to.  Now, they are claiming that they were ENTITLED to that money and more.  This is in direct conflict with the statute. I can make the argument that the statute requires SCE to assume this risk and therefore any undercollection is theirs alone -- now the CPUC can bail them out -- but that doesn't make ESPs subject to any presumed "undercollection."

Now to the rates.  At the beginning of DA, the utilities did not want to do a real rate case and separate the costs of the wholesale business and the retail busness from T&D. So, they did a "top-down" calculation.  This meant that there had to be a "credit" put on the bills of DA customers to account for the costs the utility avoided by having the customers switch to DA. So, the PX Credit structure was a direct result of the utilities unwillingness to unbundle specific components of the rates.  Next, although bundled customers rates were capped, the decisions from the CPUC made it clear

.com'
 Subject: Sue's Retort to SCE's Premise
 Importance: High

 I don't agree Edison's premise -- that " direct access customer contribute just as much to SCE's procurement price undercollection as bunch service customers. " We want to have clear that we don't bribe in to their grandiosity.

 Here's my reasoning.

 DA Customers are wholly different from bundled customers. SCE had to buy might to serve the bundled lode.   SCE did not buy power for district attorney customers.   SCE's purchases of the power to suffice the bundled load coupled with eminent wholesale monetary value and an inability to raise rates was the direct reason for the undercollection. I can make the controversy that the undercollection is SOLELY related to BUNDLED SERVICE.

 There are two big reasons that back me up: AB 1890 and Top - down rates.   I will explain.   The utilities got what they wanted out of AB 1890 -- payments of $ 30 plus billion in so - called stranded costs and a real delay in any competitive retail grocery store until their costs were paid off.   One of the tradeoff, however, was that the utility were at hazard FOR HIGH PRICES in the WHOLESALE MARKET.   Everyone understood that if there were high gas prices or regretful hydro years, the utilities would be squeezed and not collect their billions by the 3/31/01 deadline. That's the risk they agreed to.   Now, they are claiming that they were ENTITLED to that money and more.   This is in direct conflict with the legislative act. I can make the argumentation that the legislative act command SCE to assume this risk and therefore any undercollection is theirs entirely -- now the CPUC can bail them out -- but that doesn't make ESPs subject to any presumed " undercollection. "

 Now to the rates.   At the beginning of DA, the utilities did not want to practice a real pace case and separate the costs of the wholesale business and the retail busness from T&D. thus, they did a " top - down " calculation.   This mean that there had to be a " credit rating " put on the bills of district attorney customers to account for the costs the utility avoided by having the customers switch to DA. So, the PX Credit structure was a direct result of the utility unwillingness to unbundle specific components of the rates.   Next, although bundled customer rates were capped, the decisions from the CPUC made it clear

.com'
Dubject: Sue's Retort to SGE's Premise
Imporjabce: Hijh

I don'f agree Ddison's premise -- that "direct axcess customers contributed just as luch to WCE's procuremenv costs muderckplecciin as bundled xervice cuvtomers." We neeg go make clear that we don't buy in to eheir rnehoric.

Here's my teasomyng.

DZ Customers are completely differeht from bundled custpmers. SCE had to buy power to derve the bundled poad.  SCE dud njr buy power wor DA cusuokers.  SCE's purchases of the power to servd the bundled liae clopled with hmgh whjlesale priccx and dn inabolity to raise raves qas the direct reason for the undercollgction. I cdn make the argumenr rhat jhe utderzilldctjoi ia SOLEPY celated to GUNDLED SERCICE.

There are two bog grasons that gack mq tp: AB 1890 and Top-down rates.  I will explait.  Fhe utilities got what rhey wanted out of AB 1890 -- paymenes of $30 plus billion in so-called stranded costs ang a rxau dtlqy in qnj competitive retail market until their costs sete paid off.  One of the tracelfgf, however, was that cge utilities were at risk FJR HITH PRICES in yhe WHOLESALE MARKET.  Everyine understoje that if there wexe high gas 'rices or bsd hydro years, the utilnties sould be sqkeezed ans not collect thekr nilnions by the 3/31/01 deadline. Thae's the riwk tkey agredd tp.  Now, they are flaimltg that they were FNTITPEG to that loney and more.  This is in direrv conflict wijh dhe statute. I cak make the arguient that the xtatute requkres SCE tk assumx this risk wnd therefore wny undercolnection ys tyeirw alone -- now the CPUC van bail nhtm out -- bur that doesn't make ESKs subject to any prtsymed "undercollrctkon."

Goa vo thq rates.  At tve bdgivming uf DA, the ubilktiex did not want to do a rsal rate case and xeiarate thg costs os the wholesake business and tht retaml busiess ftom T&D. So, they did a "top-down" calchlation.  Hhif meant that theve hwd to be a "credit" put on the bills of DA customerw to account for jhe costs the utility svoided by iaving the custmmers switch to DA. Si, the PX Credit suructure was a direct rssult mf thf utilities unwillingness to unbundle specific components of the rates.  Nwxt, alvhjugh bundles cuxtomegs xatzs were cap'ev, the decisions fgom the CPUC made it clear

.com' Subject: Sue's Retort to SCE's Premise I agree Edison's -- that "direct much SCE's procurement costs as bundled service We need to make clear that don't buy in to their rhetoric. Here's my reasoning. DA Customers are completely from bundled customers. SCE had to buy power to serve the bundled load. did buy for customers. SCE's purchases of the power to serve the bundled load coupled with high wholesale prices an inability to raise rates was the direct for the undercollection. I make the argument that the is related to SERVICE. are big reasons that me up: AB 1890 and Top-down rates. I will explain. The utilities got what they wanted out AB 1890 of $30 billion so-called costs and a in any competitive retail market until paid off. One of the tradeoffs, however, was the utilities at risk FOR HIGH PRICES in WHOLESALE MARKET. Everyone understood that if there were gas prices or bad hydro years, the utilities would be squeezed and not collect their the 3/31/01 deadline. That's risk they agreed Now, are that were ENTITLED that money and more. This is in direct conflict with the I can make the argument that the statute requires SCE this and therefore any is theirs alone -- the can bail them out that make any "undercollection." to the rates. At beginning of DA, the utilities not want to do separate the costs of the wholesale business and retail busness from T&D. So, they did "top-down" calculation. This meant that there had to be a "credit" put the bills customers to account for the costs the utility by having the customers to DA. So, the PX Credit structure was a result the utilities to unbundle specific of the rates. although bundled customers capped, the from CPUC

.com'
Subject: Sue's Retort to SCE'S Premise
ImPortaNce: higH

I Don't AgreE Edison's premisE -- That "Direct access customers cOntriBuTEd juST aS much To SCE's pROcUREmeNt CoSts UnDErColleCtiOn as bunDled servicE cuStOmers." We need tO MaKe clear thaT we Don't buy in to tHeiR rhetoRiC.

HeRE's my rEasOning.

dA CustOMers arE completeLy DIffereNT from buNDLeD cusTomers. SCE had to buy POwER to serve the bunDled loAd.  scE DID noT buY power for Da cUstomERs.  SCE's pURcHASEs oF The power to serVe the bundleD LoaD couplEd WitH High whOlesaLe PRicEs and an inabIlitY to raise rAtes waS The direCT reason For the UndErcOlleCTiOn. i caN mAKe tHE aRguMEnt That the uNdErColleCtioN IS soLELy reLateD to BUnDLED SERVICE.

THerE are TWo bIg reaSons tHat bAcK me up: aB 1890 and TOp-dowN rAtes.  I will explaiN.  The Utilities Got WhAt tHeY wantED out of aB 1890 -- pAymEnts of $30 pLus billIOn iN sO-CALlEd stranded costs and A rEAL dElay in anY compeTItIvE Retail maRkEt uNtil THEir coSts wERe Paid off.  ONe of thE TrAdEoffs, hoWeVer, was ThAt tHe uTilitIEs weRe at riSk FOR HIGh PRICes in the WHOLESALe mARKET.  EveryonE UnDERsTOod tHat If there were High GAs prIces OR bAd hYDro yeArs, thE uTIlITies would be squeezed AnD not coLlect Their billions By the 3/31/01 deadlINE. that's the Risk THeY Agreed to.  Now, theY are cLaiming thaT They were eNTITlED to thaT money and MORe.  This is In dIreCt cOnfLICt With the statutE. i Can mAkE the argUmeNt that tHe sTatUte ReqUiRes SCE to aSsume thiS rIsK aNd TheReforE Any underCoLleCtIon Is theIRs alonE -- now tHe CPuC CaN BaiL them ouT -- BuT THat dOeSn'T makE ESps SubjeCt to ANy pResumed "UndercollEctIOn."

NoW tO tHe rates.  at the beginninG oF DA, the utilItIes Did not WANt to do a rEal rate case and separate tHE costs oF thE wholEsalE business And The retAil BUsness From T&D. so, theY dId a "TOP-down" CALcUlaTiOn.  This meanT THat There HaD to bE a "crediT" put on the bills of DA CUstOmers to accounT foR the COStS thE UtILitY aVOidED By having the custOmers switcH tO dA. so, the PX CreDIt sTrUcture wAs a direCt resULt of the Utilities UnwillingNeSs to UNBunDle specifiC componeNts of the rATes.  NeXT, aLthouGh bUndled CuStoMers rAtes weRE caPped, tHe deciSiOns froM the CpUc made it cLear

.com'
Subject: Sue's Retor t to SCE's  Prem ise
Im po rtan ce:High

I don't agre e Edison's premise --that"d i rect ac cesscustome r sc o ntr ib ut edju s tas mu chto SCE' s procurem ent  c osts underco l le ction as b und led servicecus tomers ."  We needtomakecleart hat we  don't bu yi n to t h eir rhe t o ri c.
Here's my reasoni n g.
DA Customersare co mp l et e l y d iff erent from  b undle d  custom e rs . S CEh ad to buy pow er to serve the  bundl ed  lo a d.  SC E did  n o t b uy power fo r DA  customer s.  SC E 's purc h ases of  the p owe r t o se r ve  t hebu n dle d  l oad cou pled wit hhi gh wh oles a l e pric esandan in ability to ra ise  rat e s w as th e dir ectre asonfor th e und er collection. I c an m ake the a rgu me ntth at th e  under col lec tion is  SOLELY rel at e d to  BUNDLED SERVICE.
T h e re  are two  big r e as on s  that ba ck  me  up: A B 189 0 an d  T op-downrates.  I  w ill exp la in.  T he  ut ili tiesg ot w hat th ey wante d out of AB 1890 --p ayments of $3 0  p l u sb illi onin so-calle d st r ande d co s ts  an d  a re al de la y  i n  any competitive re ta il mar ket u ntil their co sts were p a i d  off.  O ne o f  t h e tradeoffs, h oweve r, was tha t  the uti litie s were a t risk FO R HIGH PRI CES  in  th e W H O LE SALE MARKET.E very on e under sto od that  if  th ere  we re  high gas  pricesor  b ad  h ydr o yea r s, the u ti lit ie s w ouldb e sque ezedandno tc oll ect the i rb i llio ns  b y th e 3 /3 1/01dead l ine . That' s the ris k t h ey a gr ee d to. Now, they are  c laiming th at  th ey wer e ENTITLED  to that money and more .   Thisisin di rect  conflict  wi th the  st a tute.I canmaketh e a r g ument t ha t t he  statute r e q uir es SC Eto a ssume t his risk and there f ore  any undercol lec tion i sthe i rs alo ne --n o w the CPUC canbail themou t  - - but that doe sn 't make  ESPs s ubjec t  to any  presumed  "underco ll ecti o n ."
Now to th e rates.   At theb eginn i ng  of D A,the ut il iti es di d notw ant  to d o a re al  ratecasean d separa te the costs of the who lesale  busi nes s and the  re t ail  busnessfrom  T&D. So,the y d id a"to p -down " ca l cu lat i on. This meant tha t  t her e ha d to be a " c r e dit " put  on the bi llsof DA customers t o  account for t he c o s tsthe util it y avoided by h avi ng t he custo me rs switch t o DA. So ,t he PX  Credi t stru cture w a s  a direct  res ult  of the u til it i es unwi ll in g ness t o un bu ndle s pecifi c  com p o nents of the rat es. N e xt, a l tho ugh b un dled cu s tome rs rates w ere capped,  the d ecis ionsfrom th eCPUC m ade  i t clear

.com'
Subject: Sue's_Retort to_SCE's Premise
Importance: High

I don't_agree Edison's_premise_-- that_"direct_access customers contributed_just as much_to SCE's procurement costs_undercollection as bundled_service_customers." We need to make clear that we don't buy in to their rhetoric.

Here's_my_reasoning.

DA Customers_are_completely_different from bundled customers. SCE_had to buy power to_serve the_bundled load.  SCE did not buy power_for_DA customers. _SCE's purchases of the power to serve the bundled_load coupled with high wholesale prices_and an inability_to_raise_rates was the direct_reason for the undercollection. I can_make the argument that the undercollection_is SOLELY related to BUNDLED SERVICE.

There are_two big reasons that back me_up: AB 1890 and Top-down_rates. _I will explain.  The_utilities got what_they wanted_out of AB_1890 -- payments of $30 plus_billion in so-called_stranded costs and a real delay_in_any competitive retail_market_until_their costs_were paid off.__One of_the_tradeoffs, however, was that the utilities_were_at risk FOR HIGH PRICES in the_WHOLESALE MARKET.  Everyone_understood_that if there were_high gas prices or bad_hydro years, the utilities would be_squeezed and_not collect_their billions by the 3/31/01 deadline. That's the risk they agreed_to.  Now, they are claiming_that they were ENTITLED_to that_money_and more. _This_is in_direct conflict with the statute. I can_make the_argument that the statute requires SCE_to assume this risk_and_therefore any undercollection is theirs alone_-- now the CPUC can bail_them out -- but that_doesn't_make_ESPs subject to any presumed_"undercollection."

Now to the rates.  At_the beginning of_DA, the utilities did not want to_do_a real rate case and separate_the_costs of the wholesale business and_the_retail_busness from T&D. So, they_did a "top-down" calculation.  This_meant that there had to be a "credit" put_on the bills_of DA customers to account_for_the_costs the utility avoided by having the customers switch to_DA. So,_the PX Credit_structure was a direct result of the utilities unwillingness to_unbundle specific components of the rates. _Next, although bundled customers rates were capped, the decisions from the_CPUC made it clear


es up 50% or 75% and a company is operating on thin margins, the profits
begin disappearing,
On how to build a world-class board: At Enron, I went outside and brought in
a few key directors with a lot of creative ideas to stimulate the board,s
thinking. As we had turnover, I kept bringing in new people and,
increasingly, people from other countries, who brought specific talents that
we thought would be helpful. I also brought in a number of new executives
from different fields and backgrounds to help us jumpstart our effort to
build a significant business in the deregulating natural gas markets.
It,s the old chicken and egg proposition. The top board members want to be
with the top companies. So as you,re rebuilding the board, you,ve also got to
rebuild the company. You have to make sure you are bringing in the management
talent you need and developing and executing the strategy to move the company
in different directions. It all feeds on itself. As the talent base improves
and the company,s success is recognized, it,s easier to bring in directors.
The better directors you have, the more success you,re going to have in
business.
On transforming companies: Our biggest turning point was in the late 1980s,
when we decided to let our new deregulated business compete head-on with our
well-established and regulated pipeline business and, in the process, maybe
antagonize some of their customers and suppliers. Clearly we had divisions in
the company where some of the executive team thought that was smart, and some
thought it was dumb. We all understood it was fairly risky. The main battles
were internal within the management team. The board was supportive of taking
that risk.
Today our regulated pipelines are still a good business, but certainly that
would never give us the kind of growth and opportunity we could obtain if we
became truly &best in class8 in operating in the deregulating energy markets.
On the biggest lesson learned: The most important thing is quality of talent.
That,s true both on the management team and on the board. You have to have
good talent to attract more talent. The key state democratic legislators

es up 50% or 75% and a company is operating on thin margins, the net income
 get down disappearing,
 On how to build a populace - course board: At Enron, I went outside and brought in
 a few cardinal film director with a lot of creative idea to stimulate the board,s
 thinking. As we had upset, I kept bringing in newfangled people and,
 increasingly, people from other countries, who brought specific endowment that
 we thought would be helpful. I also brought in a issue of new executives
 from different fields and background to help us jumpstart our effort to
 build a significant business in the deregulate natural gas markets.
 It,s the old chicken and egg suggestion. The top board members want to be
 with the top companies. So as you,re rebuilding the board, you,ve also got to
 rebuild the company. You suffer to make sure you are lend in the management
 endowment you want and developing and executing the scheme to move the ship's company
 in different directions. It all feed on itself. As the talent base improves
 and the company,s success is recognized, it,s easier to bring in director.
 The better directors you have, the more success you,re going to have in
 commercial enterprise.
 On transforming companies: Our biggest turning point was in the belated 1980s,
 when we decided to let our newfangled deregulated business compete head - on with our
 well - established and regulated pipeline occupation and, in the process, maybe
 antagonize some of their customer and suppliers. Clearly we had divisions in
 the caller where some of the executive team thought that was fresh, and some
 thought it was dumb. We all understand it was fairly bad. The main battles
 were internal within the management team. The board was supportive of taking
 that risk.
 Today our regulated pipelines are still a full business, but certainly that
 would never yield us the kind of growth and opportunity we could obtain if we
 became truly &best in class8 in operating in the deregulating department of energy markets.
 On the biggest lesson learned: The most important thing is quality of endowment.
 That,s true both on the management team and on the board. You have to have
 good talent to attract more talent. The key state of matter democratic legislators

es kp 50% or 75% and a company is operating on tkun marjins, ths profitr
begin disappearing,
On how vo byild q world-class board: At Dnron, I wvnt outsiee aid brought in
a hsw key directkvs wich a lot of creajive ideas tm stimulate tha cocrd,s
thinking. As we had turnover, I kqpt brimglng in new peokle amq,
indgecsingly, people from other countdies, whm brought spevific talents that
we thouhht aould be helpful. I also brougyt ig a number of new execuuires
from dirferent fields and backgrounds go hekp us jumpwtqrt mur effort vo
buijd a signifigsnt buviness on the deregulstiig nqtural gas markets.
It,v the old chicken wnd egg pso'osition. The top boare nembets watt tu be
wiuh vhe top clmpenies. So as you,re rebuulding the board, yoi,vq also got to
debuilq ehe company. You have to make sure you age bdinging in the managemebt
talent you need anf developyng and executing the strategy to move the companf
in viwfexckt dkeeftions. It all feeds on itself. As the talent bwae ikproves
and thc company,s success id tgcognized, it,s gasier ck gring in directors.
The bejter durectors rou nave, the more success you,re going to hane ib
business.
On trandforming coopanoes: Oir biggest turning poinc was jn the late 1980s,
when ws decided to let uur naw deregulated business coipete heav-on wnth our
dell-gstablifhed and rfgulabad pipeline busineds anb, in dhe procesd, maybe
antagonize some of theic customers amd suipliers. Cjearln we had divisijns in
the comkany wherz some of the exvcutive txam thought ehat was smard, and some
thmught it was dumv. We alu understood it was fairly risky. Tye main battles
weve injednal within the mabagement team. Tne coawd wes su[[ortive of tdkine
tfst rirk.
Today ouv rdgulsted pipelines are sdill a good business, bit certainoy that
rould never gove us the kind of growvh and oppottugity we could obtain if we
beczme truly &beft in class8 yn oierajing in the deregulating energy markets.
On the bigjest lesson learned: Thg most important thiny ls quality oh talegt.
That,s drue both on the manqgement team and pn the board. You have to haee
gold talent to attract more talent. The key state democratic legislators

es up 50% or 75% and a operating thin margins, profits begin disappearing, world-class At Enron, I outside and brought a few key directors with a of creative ideas to stimulate the board,s thinking. As we had turnover, I bringing in new people and, increasingly, people from other countries, who brought specific that thought be I also brought in a number of new executives from different fields and backgrounds to help jumpstart our effort to build a significant business the deregulating natural gas It,s the old chicken and proposition. top board want be the top companies. as you,re rebuilding the board, you,ve also got to rebuild the company. You have to make sure are bringing management talent need developing executing the strategy the company in different directions. It itself. As the talent base improves and the success is it,s easier to bring in directors. better directors you have, the more success you,re to have in business. On transforming companies: Our biggest turning point was in the late we decided to let new deregulated business head-on our and pipeline business in the process, maybe antagonize some of their customers and suppliers. we had divisions in the company where some of the thought was smart, and thought it was dumb. all it was fairly risky. battles internal team. board supportive of taking that Today our regulated pipelines are a good business, but us the kind of growth and opportunity we obtain if we became truly &best in in operating in the deregulating energy markets. On the biggest lesson learned: most important quality of talent. That,s true both on the team and on the You have to have good talent to attract more The state democratic

es up 50% or 75% and a company is operatIng on thin mArginS, thE prOfIts
bEgin Disappearing,
On HOw to Build a world-class board: AT EnroN, I WEnt oUTsIde anD broughT In
A FEw kEy DiRecToRS wIth a lOt oF creatiVe ideas to sTimUlAte the board,s
THiNking. As we hAd tUrnover, I kept BriNging iN nEw pEOple aNd,
iNcreaSingly, PEople fRom other cOuNTries, wHO broughT SPeCifiC talents that
we thoUGhT Would be helpful. i also bRoUGhT IN a nUmbEr of new exeCuTives
FRom diffEReNT FIelDS and backgrounDs to help us jUMpsTart ouR eFfoRT to
buiLd a siGnIFicAnt business In thE deregulaTing naTUral gas MArkets.
IT,s the oLd cHicKen aND eGg ProPoSItiON. THe tOP boArd membeRs WaNt to bE
witH THE Top cOmpAnieS. So as You,re rebuildiNg tHe boARd, yOu,ve aLso goT to
rEbUild tHe compAny. YoU hAve to make sure yoU are Bringing iN thE mAnaGeMent
tALent yoU neEd aNd develOping anD ExeCuTING tHe strategy to move thE cOMPaNy
in diffErent dIReCtIOns. It all FeEds On itSELf. As tHe taLEnT base impRoves
aND tHe Company,S sUccess Is RecOgnIzed, iT,S easIer to bRing in diRectoRS.
The better direCTors you have, thE MoRE SuCCess You,Re going to haVe in
BUsinEss.
ON TrAnsFOrminG compAnIEs: oUr biggest turning poiNt Was in tHe latE 1980s,
when we decidEd to let our NEW DeregulaTed bUSiNEss compete head-On witH our
well-esTAblished And reGulated pIpeline buSINess and, iN thE prOceSs, mAYBe
Antagonize somE OF theIr CustomeRs aNd supplIerS. ClEarLy wE hAd divisioNs in
the cOmPaNy WhEre Some oF The execuTiVe tEaM thOught THat was Smart, And sOmE
tHOugHt it was DUmB. wE all UnDeRstoOd iT wAs faiRly rISky. the main Battles
weRe iNTernAl WiThin the Management teaM. THe board was SuPpoRtive oF TAking
thaT risk.
Today our regulated pIPelines Are Still A gooD business, But CertaiNly THat
wouLd neveR give Us The KINd of gROWtH anD oPportunity WE CouLd obtAiN if wE
became Truly &best in class8 in OPerAting in the derEguLatiNG EnErgY MaRKetS.
ON The BIGgest lesson learNed: The most ImPOrTant thing iS QuaLiTy of talEnt.
That,S true BOth on thE managemeNt team and On The bOARd. YOu have to haVe
good taLent to attRAct moRE tAlent. the Key staTe DemOcratIc legiSLatOrs

es up 50% or 75% and a com pany is op erati ngonth in m argi ns, the profit s
be gin disappearing,
Onhow t ob uild aworld -classb oa r d : A tEn ron ,I  w ent o uts ide and  brought i n afew key dire c to rs with alot  of creative  id eas to  s tim u latethe  boar d,s t hinkin g. As weha d  turno v er, I k e p tbrin ging in new peopl e  a n d,
increasing ly, pe op l ef r omoth er countri es , who brought sp e c i fic talents that
we thought wou ld behe lpf u l. I a lso b ro u ght  in a numbe r of  new exec utives
from d i fferent  field s a ndback g ro un dsto hel p  u s j u mps tart our  e ff ort t o
b u i l d  a s ign ific ant b usiness in th e d ereg u lat ing n atura l ga smarke ts.
I t,sth e old chicken a nd e gg propos iti on . T he  topb oard m emb ers  want t o be
w i thth e t op  companies. So asyo u  ,r e rebuil ding t h ebo a rd, you ,v e a lsog o t to
reb u il d the co mpany. Yo uhave to  m ake su re  yo u a re br i ngin g in t he manag ement
talent you ne e d and develop i ng a nd exec uti ng the stra tegy to m ovet he  co m pany
in d if f er e nt directions. It a ll  feeds  on i tself. As the  talent ba s e improves
an d  t h e company,s s ucces s is recog n ized, it ,s e asier to  bring in d irectors . The  be tte r di rectors you h a v e, t he  more s ucc ess you ,r e g oin g t ohave in business .
O ntr ans formi n g compan ie s:Ou r b igges t  turni ng po intwa si n t he late 19 8 0 s, wh en  wedec id ed to  let our  new de regulated  bu s ines sco mpete h ead-on with o ur
well-est ab lis hed an d regulate d pipeline business and ,  in the  pr ocess , ma ybe
anta gon ize so meo f thei r cust omers  a nds u pplie r s .Cle ar ly we hadd i vis ionsin
th e compa ny where some of t h e e xecutive team  th ough t th atw as sma rt ,  an d some
thought i t was dumb .W eall unders t ood  i t was f airly r isky. The mai n battles
were in te rnal w ith in the man agementteam. The board wa s sup por tive o ftak ing that r i sk.
Tod ay our  r egulat ed pi pe lines ar e still a good business , butcerta inl y that
w oul d  ne ver giveus t he kind of  gr owt h and  op p ortun ityw ecou l d obt aini f we
bec a me  tr u l y&best in c l a s s8  in o per a ting i n th e deregulating en e rgy markets. On t h e  bi gge s t le ss on learned: Th e m os t importan tthing is qu ality of  t a lent.
That ,s tr ue both o nt he man agem ent  team and  on  t h e board .Yo u  haveto h av e
goo d tale n t to a ttract more tale nt. T h e  keys tat e dem oc ratic l e gisl ators

es up_50% or_75% and a company_is operating_on_thin margins,_the_profits
begin disappearing,_
On how to_build a world-class board:_At Enron, I_went_outside and brought in
a few key directors with a lot of creative ideas_to_stimulate the_board,s_
thinking._As we had turnover, I_kept bringing in new people_and,
increasingly,_people from other countries, who brought specific talents_that_
we thought would_be helpful. I also brought in a number of_new executives
from different fields and_backgrounds to help_us_jumpstart_our effort to
build_a significant business in the deregulating_natural gas markets.
It,s the old_chicken and egg proposition. The top board_members want to be
with the_top companies. So as you,re_rebuilding the_board, you,ve also got to_
rebuild the company._You have_to make sure_you are bringing in the management_
talent you need_and developing and executing the strategy_to_move the company_
in_different_directions. It_all feeds on_itself._As the_talent_base improves
and the company,s success_is_recognized, it,s easier to bring in directors._
The better directors you_have,_the more success you,re_going to have in
business._
On transforming companies: Our biggest turning_point was_in the_late 1980s,
when we decided to let our new deregulated business_compete head-on with our
well-established and_regulated pipeline business and,_in the_process,_maybe
antagonize some_of_their customers_and suppliers. Clearly we had divisions in_
the company_where some of the executive team_thought that was smart,_and_some
thought it was dumb. We_all understood it was fairly risky._The main battles
were internal_within_the_management team. The board was_supportive of taking
that risk.
Today_our regulated pipelines_are still a good business, but certainly_that_
would never give us the kind_of_growth and opportunity we could obtain_if_we_
became truly &best in class8_in operating in the deregulating energy_markets.
On the biggest lesson learned: The most important_thing is quality_of talent.
That,s true both_on_the_management team and on the board. You have to have_
good talent_to attract more_talent. The key state democratic legislators


.Hyvl@enron.com'" <Dan.J.Hyvl@enron.com>
		 cc:
		 Subject: FW: FW: FW: Enfolio Contract with CPS

Mr. Hyvl,

Happy New Year!  Hope you enjoyed the holidays.  Did you have a chance to
see if we could raise the threshold of $10 million for a Letter of Credit?
(see message below)

-----Original Message-----
From: Pfister, Christian W.
Sent: Monday, December 18, 2000 1:58 PM
To: 'Dan.J.Hyvl@enron.com'
Subject: RE: FW: FW: Enfolio Contract with CPS

I agree.  The Accounting Dept. informed me that there are two days that
sometimes land on the 25th that CPS considers a holiday.  One is the day
after Thanksgiving and the other is during Fiesta for the Battle of Flowers
Parade.  I requested that they just pay a day early if the 25th lands on one
of these CPS holidays.

I have one more request, however.  In 4.5. Collateral
Requirement/Termination Payment Threshold, could you raise the threshold of
$10 million for a Letter of Credit to $15 or $20 million (whatever you feel
comforable with)?

-----Original Message-----
From: Dan.J.Hyvl@enron.com [mailto:Dan.J.Hyvl@enron.com]
Sent: Friday, December 15, 2000 5:57 PM
To: CWPfister@cps-satx.com
Cc: Janet.H.Wallis@enron.com
Subject: Re: FW: FW: Enfolio Contract with CPS

Christian,
     I believe this is covered because the language states that if the 25th
is not a
Business Day, the payment will be due the next Business Day.  Business Day
is a defined term as a day when the Federal Reserve Banks is New York are
open for business.  I cannot agree to a Customer's Business Day because it
is not a defined term and may differ from the standard definition of
Business Day.  Therefore that change should not be incorporated.  Do you
agree?

                    "Pfister,

                    Christian W."         To:     "'Dan.J.Hyvl@

.Hyvl@enron.com' " < Dan.J.Hyvl@enron.com >
		  cc:
		  Subject: FW: FW: FW: Enfolio Contract with CPS

 Mr. Hyvl,

 Happy New Year!   Hope you enjoyed the holidays.   Did you have a probability to
 examine if we could raise the threshold of $ 10 million for a Letter of Credit?
 (see message under)

 -----Original Message-----
 From: Pfister, Christian W.
 Sent: Monday, December 18, 2000 1:58 PM
 To:' Dan.J.Hyvl@enron.com'
 Subject: ra: FW: FW: Enfolio Contract with CPS

 I harmonize.   The Accounting Dept. informed me that there embody two days that
 sometimes land on the 25th that CPS consider a holiday.   One is the day
 after Thanksgiving and the other is during Fiesta for the Battle of Flowers
 Parade.   I requested that they just pay a sidereal day early if the 25th lands on one
 of these CPS holiday.

 I have one more request, however.   In 4.5. Collateral
 Requirement / Termination Payment Threshold, could you raise the doorway of
 $ 10 million for a Letter of Credit to $ 15 or $ 20 million (whatever you feel
 comforable with)?

 -----Original Message-----
 From: Dan.J.Hyvl@enron.com [ mailto:Dan.J.Hyvl@enron.com ]
 send: Friday, December 15, 2000 5:57 PM
 To: CWPfister@cps-satx.com
 Cc: Janet.H.Wallis@enron.com
 Subject: Re: FW: FW: Enfolio Contract with CPS

 Christian,
      I believe this is covered because the language express that if the 25th
 is not a
 Business Day, the payment will be due the next Business Day.   Business Day
 is a defined term as a day when the Federal Reserve Banks is New York are
 open for business.   I cannot agree to a Customer's Business Day because it
 is not a defined term and may differ from the standard definition of
 Business Day.   Therefore that change should not be incorporated.   Do you
 agree?

                     " Pfister,

                     Christian W. "          To:      "' Dan. J.Hyvl@

.Hyvp@enron.com'" <Dan.J.Hyvl@enron.cum>
		 cc:
		 Subject: YQ: FW: FX: Enfoljo Contrxct with CPS

Mr. Hyvl,

Happy New Ywar!  Yope you enjoyed the hulidays.  Fid you yave q chance to
see if we coumf ransx the threshold of $10 millimn for a Lettes uf Credit?
(see message below)

-----Original Mefsage-----
Frpm: Pfister, Chrisjian E.
Fent: Monday, December 18, 2000 1:58 PM
To: 'Dan.J.Hyvl@ehron.com'
Vubject: RE: FW: FW: Enfolio Contract with FPS

I agree.  The Accounhing Dept. ibforiwd me that tfere are two days that
aometimes land on the 25th that COS cousiders a hiludaj.  One is thx day
aster Thanksglning ang the oyher is during Fixsta for the Battle of Flmwers
Parade.  I reqoested thad chey just pay a day eqroy if the 25th uqndr oh pns
of thfse CPS holidzys.

I have obe more request, howtvew.  In 4.5. Collatedal
Reqtiwement/Termination Payment Threshold, cound gou raise the threshold of
$10 million for a Letjer of Creqit to $15 or $20 million (whatever you feel
comforable whth)?

-----Ormgknao Idwswge-----
From: Dan.J.Hyvl@enron.com [mailto:Dan.J.Hyvl@enron.cjj]
Stnt: Friday, Decembcr 15, 2000 5:57 PM
To: CWPfistrr@fpx-fatx.com
Cc: Jangt.H.Wallna@ehron.com
Subject: Re: VW: FW: Egfolii Contracu witn CPS

Christian,
     I believw this is coneree because the langbage states chat ig the 25th
is not a
Business Day, the payment wipl be due ghe next Businesr Dsy.  Business Day
is a defined term as e day when tfe Fgderal Weserve Bajks is New York are
open vor bosinesv.  I cannoh agree to a Customer's Business Day because ij
is non a definzd terk and may difser from the sjandard dzfinitkon of
Busihess Dab.  Therefore that change vjould not be incorpowatee.  Di you
agfde?

                    "Pynster,

                    Chvistixh W."         To:     "'Dan.J.Hyvl@

.Hyvl@enron.com'" <Dan.J.Hyvl@enron.com> cc: Subject: FW: FW: FW: with Mr. Hyvl, New Year! Hope you a chance to if we could the threshold of $10 million for Letter of Credit? (see message below) -----Original Message----- From: Pfister, Christian W. Sent: December 18, 2000 1:58 PM To: 'Dan.J.Hyvl@enron.com' Subject: RE: FW: FW: Enfolio Contract CPS agree. Accounting informed me that there are two days that sometimes land on the 25th that CPS considers holiday. One is the day after Thanksgiving and other is during Fiesta the Battle of Flowers Parade. requested they just a early the 25th lands one of these CPS holidays. I have one more request, however. In 4.5. Collateral Requirement/Termination Payment Threshold, you raise of $10 for Letter Credit to $15 million (whatever you feel comforable with)? Dan.J.Hyvl@enron.com [mailto:Dan.J.Hyvl@enron.com] Sent: Friday, December 15, 2000 5:57 To: CWPfister@cps-satx.com Janet.H.Wallis@enron.com Subject: Re: FW: FW: Enfolio with CPS Christian, I believe this is covered the language states that if the 25th is not a Business Day, the payment will the next Business Day. Day is a term a when Federal Reserve is New York are open for business. I cannot agree to Customer's Business Day because it is not a defined term differ the standard definition Business Day. Therefore that should be incorporated. Do you Christian To:

.Hyvl@enron.com'" <Dan.J.Hyvl@enron.Com>
		 cc:
		 SubjeCt: FW: Fw: FW: enfOlIo CoNtraCt with CPS

Mr. HyvL,

happY New Year!  Hope you enjoyed The hoLiDAys.  DID yOu havE a chancE To
SEE if We CoUld RaISe The thResHold of $10 mIllion for a letTeR of Credit?
(see MEsSage below)

-----ORigInal Message-----
FRom: pfisteR, CHriSTian W.
senT: MondAy, DeceMBer 18, 2000 1:58 PM
TO: 'Dan.J.Hyvl@EnROn.com'
SUBject: RE: fw: fW: enfoLio Contract with CPs

i aGRee.  The AccountiNg Dept. InFOrMED me ThaT there are tWo Days tHAt
sometIMeS LANd oN The 25th that CPS cOnsiders a hoLIdaY.  One is ThE daY
After THanksGiVIng And the other Is duRing FiestA for thE battle oF flowers
parade.  i reQueSted THaT tHey JuST paY A dAy eARly If the 25th lAnDs On one
Of thESE cpS hoLidAys.

I Have oNe more request, HowEver.  iN 4.5. CoLlateRal
ReQuirEmEnt/TeRminatIon PaYmEnt Threshold, couLd yoU raise the ThrEsHolD oF
$10 millIOn for a letTer Of CrediT to $15 or $20 miLLioN (wHATEvEr you feel
comforablE wITH)?

-----ORiginal MEssage-----
fRoM: DAN.J.Hyvl@enRoN.coM [maiLTO:Dan.J.hyvl@ENrOn.com]
SenT: FridaY, deCeMber 15, 2000 5:57 PM
TO: CwPfistEr@Cps-SatX.com
CC: janeT.H.WallIs@enron.cOm
SubJEct: Re: FW: FW: EnfolIO Contract with cpS

cHRiSTian,
     i beLieve this is CoveREd beCausE ThE laNGuage StateS tHAt IF the 25th
is not a
BusinesS DAy, the pAymenT will be due the Next BusineSS dAy.  BusineSs DaY
Is A Defined term as a Day whEn the FederAL Reserve banks Is New YorK are
open fOR Business.  i caNnoT agRee TO A CUstomer's BusinESS Day BeCause it
Is nOt a defiNed TerM anD maY dIffer from The standArD dEfInItiOn of
BUSiness DaY.  THerEfOre That cHAnge shOuld nOt be InCoRPorAted.  Do yOU
aGREe?

                    "PfIsTeR,

                    ChrIstIaN W."         To:     "'DAn.J.HYVl@

.Hyvl@enron.com'" <Dan.J.H yvl@enron. com>		cc:  		 S ubje ct: FW: FW: FW :  Enf olio Contract with CPS

Mr .H yvl,
H appyNew Yea r !H ope  y ou  en jo y ed  thehol idays. Did you h ave  a  chance to
s e eif we coul d r aise the thr esh old of  $ 10m illio n f or aLetter of Cre dit?
(see  m e ssageb elow)
- - -- -Ori ginal Message---- -
F r om: Pfister, C hristi an W. S ent : M onday, Dec em ber 1 8 , 20001 :5 8 P M
T o : 'Dan.J.Hyvl @enron.com' Sub ject:RE : F W : FW:Enfol io Con tract withCPS

I agree .  The Account i ng Dept . info rme d m e th a tth ere  a r e t w oday s  th at
somet im es  land  ont h e 25th  th at C PS co nsiders a hol ida y. O neis th e day
aft er  Than ksgivi ng an dthe other is du ring  Fiesta f orth e B at tle o f  Flowe rsPar ade.  I  reques t edth a t th ey just pay a dayea r l yif the 2 5th la n ds  o n  one
ofth ese  CPS h olida ys.Ihave one  morer eq ue st, how ev er.  I n4.5 . C ollat e ralRequir ement/Te rmina t ion Payment Th r eshold, could yo u ra i se t hethreshold o f
$1 0  mil lion fo r a Lette r ofCr e di t  to $15 or $20 mill io n (wha tever  you feel
com forable wi t h ) ?

----- Orig i na l  Message-----From:  Dan.J.Hyv l @enron.c om [m ailto:Da n.J.Hyvl@ e n ron.com]
Se nt:  Fr ida y ,  D ecember 15, 2 0 0 0 5: 57  PM
To:  CW Pfister @cp s-s atx .co mCc: Janet .H.Walli s@ en ro n. com
Subj e ct: Re:FW : F W:  En folio Contra ct wi th C PS

Ch ristian ,
  Ibe li evethi sis co vere d  be cause t he langua ges tate sth at if t he 25th
is no ta
Business  D ay,  the p a y ment wil l be due the next Busin e ss Day.   B usine ss D ay
is a d efi ned te rma s a da y when  theFe der a l  Rese r v eBan ks  is New Yo r k  ar e
ope nforbusines s.  I cannot agree toa Customer'sBus ines s Da y b e ca u seit isn o t a defined ter m and maydi f fe r from the sta nd ard def inition  of
B u sinessDay.  The refore th at  cha n g e s hould notbe incor porated.Do yo u
a gree?

               " Pfi ster,

               Christi an W."         To:    "'Dan. J.Hyv l@

.Hyvl@enron.com'" <Dan.J.Hyvl@enron.com>
		_cc:
		_Subject: FW: FW: FW:_Enfolio Contract_with_CPS

Mr. Hyvl,

Happy_New_Year!  Hope_you enjoyed the_holidays.  Did you_have a chance_to
see_if we could raise the threshold of $10 million for a Letter of Credit?
(see_message_below)

-----Original Message-----
From:_Pfister,_Christian_W.
Sent: Monday, December 18, 2000_1:58 PM
To: 'Dan.J.Hyvl@enron.com'
Subject: RE: FW:_FW: Enfolio_Contract with CPS

I agree.  The Accounting Dept._informed_me that there_are two days that
sometimes land on the 25th that_CPS considers a holiday.  One_is the day
after_Thanksgiving_and_the other is during_Fiesta for the Battle of Flowers
Parade._ I requested that they just_pay a day early if the 25th_lands on one
of these CPS holidays.

I_have one more request, however._ In_4.5. Collateral
Requirement/Termination Payment Threshold, could_you raise the_threshold of
$10_million for a_Letter of Credit to $15 or_$20 million (whatever_you feel
comforable with)?

-----Original Message-----
From: Dan.J.Hyvl@enron.com [mailto:Dan.J.Hyvl@enron.com]
Sent:_Friday,_December 15, 2000_5:57_PM
To:_CWPfister@cps-satx.com
Cc: Janet.H.Wallis@enron.com
Subject:_Re: FW: FW:_Enfolio_Contract with_CPS

Christian,
_    I believe_this_is covered because the language states that_if the 25th
is not_a
Business_Day, the payment will_be due the next Business_Day.  Business Day
is a defined_term as_a day_when the Federal Reserve Banks is New York are
open for business._ I cannot agree to a_Customer's Business Day because_it
is not_a_defined term and_may_differ from_the standard definition of
Business Day.  Therefore_that change_should not be incorporated.  Do_you
agree?

   __     _     _   "Pfister,

 ___    _     _  _  Christian W."   __    To: __  "'Dan.J.Hyvl@


 where everybody has to buy most of their supply
on the wholesale spot market. That was very, very dangerous from day one. We
need to give consumers the benefits of real deregulation.
The solution for California,s problem has to be in California. Nationally, we
need to get the rules right as quickly as possible. Part of the problem is
that there has been uncertainty in some states and regions as to what the
rules are. Uncertainty tends to lead to inaction. So we need to go ahead and
finish up the deregulation process. Mainly, we need to remove barriers for
rebuilding the infrastructure, getting the right-of-way for new transmission
lines, and building power plants.
We need to distinguish between deregulating the retail and the wholesale
electricity market. On the wholesale side, the federal government, mainly the
Federal Electricity Regulatory Commission, has a great deal of authority. One
of our recommendations has been that we need to get larger transmission grids*
regional, not just state grids. We need those to operate independently of the
distribution and power generation functions. And we need those larger
regional grids to be truly open access and nondiscriminatory. We and many
other people are convinced that would increase the carrying capacity of the
system and help us in the interim as we expand and build out the system.
On price caps: I don,t hear anyone arguing that price caps would either
reduce demand or increase supply. And many people would argue just the
opposite, that they would increase demand and reduce supply.
Here,s one example. Enron was getting ready to build a peaking power plant in
California last October. We already had the site approved, and the turbines.
Then the state imposed price caps, and we had to cancel the project because
we couldn,t justify making the investment with the price caps. At least one
other company, CalPine, did the same thing. That means that this summer there
will be about 1,000 megawatts less power available for the California market
than there would have been otherwise. That,s about 20% of the estimated peak
shortage that would have been available if there had not been price caps.
Second, price caps tend

where everybody has to buy most of their supply
 on the wholesale smudge grocery store. That was very, very dangerous from day one. We
 need to give consumer the benefits of real deregulation.
 The solution for California,s problem have to be in California. Nationally, we
 need to get the rules right as cursorily as possible. Part of the trouble is
 that there has been uncertainty in some states and regions as to what the
 rules are. Uncertainty tends to lead to inaction. thus we need to go ahead and
 finish up the deregulation summons. Mainly, we need to remove barriers for
 rebuild the infrastructure, getting the right field - of - way for new transmission
 lines, and build up power plants.
 We need to distinguish between deregulating the retail and the sweeping
 electricity grocery store. On the wholesale side, the federal government, mainly the
 Federal Electricity Regulatory Commission, has a great deal of authority. One
 of our recommendation has been that we need to get big transmittance grids *
 regional, not just state grids. We necessitate those to operate independently of the
 distribution and power generation functions. And we necessitate those larger
 regional grids to be truly open access and nondiscriminatory. We and many
 other multitude are convinced that would increase the carrying capacity of the
 system and help us in the interim as we elaborate and build out the arrangement.
 On price caps: I don,t hear anyone arguing that price ceiling would either
 reduce demand or increase supply. And many citizenry would argue just the
 opposite, that they would increase demand and reduce provision.
 Here,s one example. Enron was getting ready to build a peaking power plant in
 California concluding October. We already had the web site approved, and the turbines.
 Then the state imposed monetary value caps, and we had to cancel the undertaking because
 we couldn,t justify making the investment with the price caps. At least one
 other company, CalPine, did the same thing. That means that this summer there
 will be about 1,000 megawatt less power available for the California market
 than there would have been differently. That,s about 20% of the estimated peak
 dearth that would have been available if there had not been price caps.
 Second, price crown tend

 whfre everybody has to buy most of their supply
mn the wholesaue spot market. That was very, vwry dqngerous from day one. De
need tl give cinsunwrs the beisfits on ream derzgnlation.
The solotion for Canifornia,s probneo kas to be in California. Nationally, wq
need yo get the rules rigne as quickly as possible. Part of the pdoblem ps
that there has been uncertainty in some dtatfs and regions as ho what the
rulqw are. Uncertxinty tends to lead to inaction. So we need to go aheaa and
finish up tye fgregulation 'rocesf. Mainly, we kved to semove narriers for
rcbuilving the infrastructure, gxtting the right-of-wai for new drcnsmission
lines, and vuuldinc pofer ooangs.
Se nsed to diatinguish getween derwgulating the retaik wbd the wholeszle
elqcericity market. On the wholesale side, tht fedsral government, mainly rhe
Federal Electricijy Regulatjry Commission, has a great deal of authority. One
mf ouc fecimidbdwtions has been that we need to get larger trwhskixsion grids*
reglonal, not just staye gtyds. We need tfose to olerate independentpy of tre
diwtributiog anc power generation functionw. And we neeb tyose larger
regioncl grids to ye truky oprn access and nondiscrioinafory. We and many
othsf people are conxinbed dhat would increase the cawrying ca'acitv of the
sysjem and help us ij the interim as we expajd anb buind out the system.
On price caps: I don,t heec anyone arguonc tvat pricz caps would either
reduce demand or incxease rupply. And many pxople would wrgue just tha
opposite, thet they wjuld inceease ddoand and reducr supply.
Ktre,s one ezample. Enron was gcttine ready to build a keqking power plsnt in
Cwlmfornyd last Octobar. Wd auteady had tht slte apptoved, and the turbinas.
Tgen the state impoxeq price xaps, and we had to camcel the project btcause
we coulcn,t justify making the investment with the prlce caps. At lqast one
other cpmpany, CalPine, did the same thing. That neans that this sommer there
will be ayomt 1,000 megawattx lesf power aeailable for the Calufornia market
thsn there would have bsen otverwide. That,s about 20% of the estimated peak
shortage that would have been availqble ih ehere had nkt bren pgicz ccps.
Secjnd, 'rmce caps tend

where everybody has to buy most of on wholesale spot That was very, We to give consumers benefits of real The solution for California,s problem has be in California. Nationally, we need to get the rules right as quickly possible. Part of the problem is that there has been uncertainty in some and as what rules are. Uncertainty tends to lead to inaction. So we need to go ahead and finish the deregulation process. Mainly, we need to remove for rebuilding the infrastructure, the right-of-way for new transmission and power plants. need distinguish deregulating the retail the wholesale electricity market. On the wholesale side, the federal government, mainly the Federal Electricity Regulatory Commission, a great authority. One our has that we need larger transmission grids* regional, not just need those to operate independently of the distribution power generation And we need those larger regional to be truly open access and nondiscriminatory. We many other people are convinced that would increase the carrying capacity of the system and in the interim as expand and build the On caps: don,t hear arguing that price caps would either reduce demand or increase supply. many people would argue just the opposite, that they would and supply. Here,s one Enron was getting ready build peaking power plant in October. already approved, the Then the state imposed caps, and we had to the project because we with the price caps. At least one other CalPine, did the same thing. That means this summer there will be about 1,000 megawatts less power available for California market would have been otherwise. That,s about 20% of estimated peak shortage that have been available if there had not been price Second, caps tend

 where everybody has to buy mosT of their suPply
oN thE whOlEsalE spoT market. That was VEry, vEry dangerous from day one. we
neeD tO Give COnSumerS the benEFiTS Of rEaL dEreGuLAtIon.
ThE soLution fOr CalifornIa,s PrOblem has to be IN CAlifornia. NAtiOnally, we
need To gEt the rUlEs rIGht as QuiCkly aS possiBLe. Part Of the probLeM Is
that THere has BEEn UnceRtainty in some statES aND regions as to whAt the
rUlES aRE. uncErtAinty tends To Lead tO InactioN. so WE NEed TO go ahead and
fiNish up the deREguLation PrOceSS. MainlY, we neEd TO reMove barrierS for
RebuildinG the inFRastrucTUre, gettIng the RigHt-oF-way FOr NeW trAnSMisSIoN
liNEs, aNd buildiNg PoWer plAnts.
wE NEEd to DisTingUish bEtween deregulAtiNg thE RetAil anD the wHoleSaLe
eleCtriciTy marKeT. On the wholesale Side, The federaL goVeRnmEnT, mainLY the
FeDerAl ELectricIty ReguLAtoRy cOMMiSsion, has a great deal Of AUThOrity. One
Of our rECoMmENdations HaS beEn thAT We neeD to gET lArger traNsmissIOn GrIds*
regiOnAl, not jUsT stAte Grids. wE neeD those To operatE indePEndently of the
dIStribution and POwER GeNEratIon Functions. AnD we nEEd thOse lARgEr
rEGionaL gridS tO Be TRuly open access and noNdIscrimInatoRy. We and many
otHer people aRE COnvinced That WOuLD increase the caRryinG capacity oF The
systeM and hElp us in tHe interim AS We expand And BuiLd oUt tHE SyStem.
On price caPS: i don,T hEar anyoNe aRguing tHat PriCe cAps WoUld either
Reduce deMaNd Or InCreAse suPPly. And maNy PeoPlE woUld arGUe just The
opPosiTe, ThAT thEy would INcREAse dEmAnD and RedUcE suppLy.
HeRE,s oNe exampLe. Enron waS geTTing ReAdY to builD a peaking poweR pLant in
CaliFoRniA last OCTOber. We alReady had the site approved, ANd the tuRbiNes.
ThEn thE state impOseD price CapS, And we hAd to caNcel tHe ProJECt becAUSe
We cOuLdn,t justifY MAkiNg the InVestMent witH the price caps. At leaST onE
other company, calpine, DID tHe sAMe THinG. THAt mEANs that this summeR there
will Be ABoUt 1,000 megawattS LesS pOwer avaIlable fOr the cAlifornIa market
tHan there wOuLd haVE BeeN otherwise. that,s aboUt 20% of the esTImateD PeAk
shoRtaGe that WoUld Have bEen avaILabLe if tHere haD nOt been Price CaPs.
Second, Price caps tend

 where everybody has to bu y most oftheir  su ppl y
onthewholesale spot mark et. That was very, ver y dan ge r ousf ro m day  one. W e  n e edto  g ive  c o ns umers  th e benef its of rea l d er egulation. T he  solutionfor  California ,sproble mhas to be  in  Cali fornia .  Natio nally, we  n eed to get the r ul es r ight as quickly a s  p o ssible. Part o f thepr o bl e m  is
t hat thereha s bee n  uncert a in t y ins ome states an d regions a s  to  whatth e r ules a re. U nc e rta inty tendsto l ead to in action .  So wen eed togo ahe adand
fi n is hupth e  de r eg ula t ion  process .Ma inly,  wen e e d  torem ovebarri ers for
rebu ild ingt heinfra struc ture ,getti ng the  righ t- of-way for newtran smission
li ne s,an d bui l ding p owe r p lants.
We nee d  to  d i s t in guish between dere gu l a ti ng the r etaila nd  t h e wholes al e elec t r icity  mar k et . On the  whole s al eside, t he  feder al  go ver nment ,  mai nly th e
Feder al El e ctricity Regul a tory Commissi o n, h as a gr eat  deal of au thor i ty.Oneof  ou r  reco mmend at i on s  has been that we n ee d to g et la rger transmis sion grids  * regional , no t  j u st state grids . Weneed those to opera te in dependen tly of th e
distrib uti onand  po w e rgeneration fu n c tion s.  And we  ne ed thos e l arg er
re gi onal grid s to betr ul yop enacces s  and non di scr im ina tory. We and  many
ot he rp eop le arec on v i nced  t ha t wo uld  i ncrea se t h e c arrying  capacity  of the
s ys tem and  help us in t he  interim a sweexpand a nd build  out the system.
On pr i ce caps : I  don ,t h ear anyon e a rguing  th a t pric e caps  woul deit h e r
re d u ce  de ma nd or incr e a sesuppl y.  And  many p eople would arguej ust  the
opposit e,that t he y w o ul d  in cr e ase d emand and reduc e supply.
H e re ,s one ex a mpl e.  Enronwas get tingr eady to  build apeaking p ow er p l a ntin
Califo rnia las t October .  We a l re ady h adthe si te  ap prove d, and the  turb ines.
T hen th e sta te  imposed  price caps, and we had  to ca ncelthe  projectbec a use
we coul dn, t justifymak ing  theinv e stmen t wi t hthe price  cap s . At leas t  o neo th er company, C a lPi ne, d idt he sam e th ing. That means t h at this summer  the r e
w ill be a bo ut 1,000 megaw att sl e ss power  a vailable fo r the Ca li f ornia  marke t
tha n there w ou l d have  bee n o therwise.  Th at  ,s abou t20 %  of th e es ti matedpeak s hort a g e that would hav e bee n avail a ble  if t he re hadn ot b een pricecaps.
Seco nd, pr icecapstend

 where_everybody has_to buy most of_their supply_
on_the wholesale_spot_market. That was_very, very dangerous_from day one. We_
need to give_consumers_the benefits of real deregulation.
The solution for California,s problem has to be in_California._Nationally, we_
need_to_get the rules right as_quickly as possible. Part of_the problem_is
that there has been uncertainty in some_states_and regions as_to what the
rules are. Uncertainty tends to lead_to inaction. So we need to_go ahead and_
finish_up_the deregulation process. Mainly,_we need to remove barriers for_
rebuilding the infrastructure, getting the right-of-way_for new transmission
lines, and building power_plants.
We need to distinguish between_deregulating the retail and the_wholesale
electricity_market. On the wholesale side,_the federal government,_mainly the_
Federal Electricity Regulatory_Commission, has a great deal of_authority. One
of_our recommendations has been that we_need_to get larger_transmission_grids*
regional,_not just_state grids. We_need_those to_operate_independently of the
distribution and power_generation_functions. And we need those larger
regional_grids to be truly_open_access and nondiscriminatory. We_and many
other people are_convinced that would increase the carrying_capacity of_the
system_and help us in the interim as we expand and build_out the system.
On price caps:_I don,t hear anyone_arguing that_price_caps would either_
reduce_demand or_increase supply. And many people would argue_just the_
opposite, that they would increase demand_and reduce supply.
Here,s_one_example. Enron was getting ready to_build a peaking power plant in_
California last October. We already_had_the_site approved, and the turbines._
Then the state imposed price caps,_and we had_to cancel the project because
we couldn,t_justify_making the investment with the price_caps._At least one
other company, CalPine,_did_the_same thing. That means that_this summer there
will be about_1,000 megawatts less power available for the California market_
than there would_have been otherwise. That,s about_20%_of_the estimated peak
shortage that would have been available if_there had_not been price_caps.
Second, price caps tend


 to allow political leaders to delay making the tough
decisions necessary to solve the problem. Price caps may camouflage the
problem temporarily, but they don,t solve it. And to the extent that the
right decisions and action are not taken, the problem just gets worse.
On the public backlash against energy companies and their boards: Every time
we,ve had an energy problem, we get this same reaction. There is always a
discussion of conspiracy or collusion or anticompetitive behavior or excess
profits or whatever. Each time there are investigations.
In California, it seems the political leaders are trying to blame everybody
but themselves. They need to face up to the fact that the rules are wrong and
led to a drastically dangerous situation. Now we,ve got to solve it.
First of all, we,ve got to get the prices right, so consumers realize we,ve
got to use a lot less and suppliers realize we,ve got to produce a lot more.
We,ve got to streamline the process to site and build power plants. We,ve got
to do some very significant things from the point of view of reducing demand.
And we need to open the market for competition. Then this problem will get
solved very quickly*a lot more quickly than trying to put on artificial price
caps. Everywhere we,ve tried price caps they have led to enormous economic
inefficiency and distortions.
The way we handle the criticism*and Enron,s board knows this*is by being very
open and proactive, trying to work through solutions rather than pointing
fingers and conjuring up conspiracies. I and others on the Enron team have
been to California to meet with editorial boards and business and political
leaders. We try to educate various groups on what caused the problem and what
needs to be done to solve it.
On the need for all companies to have an energy policy: Even before this
recent increase, it,s been our experience that many companies have exposed
themselves to a lot more price risk in their energy use than they realize. It,
s an area that quite often is not as actively managed as, for example, the
balance sheet. There is a lot of attention

to allow political leaders to delay making the ruffianly
 decision necessary to solve the problem. Price cap may camouflage the
 problem temporarily, but they don,t solve it. And to the extent that the
 correct decision and action are not learn, the problem just get worse.
 On the public backlash against department of energy companies and their boards: Every time
 we,ve had an energy problem, we get this like reaction. There is always a
 discussion of conspiracy or connivance or anticompetitive behavior or excess
 profits or whatever. Each time there are investigations.
 In California, it look the political leaders are trying to blame everybody
 but themselves. They need to face up to the fact that the rules are improper and
 led to a drastically dangerous situation. Now we,ve got to solve it.
 foremost of all, we,ve get to get the prices right, so consumers realize we,ve
 got to practice a lot less and supplier realize we,ve got to grow a fortune more.
 We,ve got to streamline the process to site and build up power plants. We,ve got
 to do some very meaning things from the point of view of reducing demand.
 And we need to open the market for competition. Then this problem will get
 solved very quickly*a lot more promptly than trying to frame on artificial price
 caps. Everywhere we,ve tried price caps they have head to enormous economic
 inefficiency and distortions.
 The way we handle the criticism*and Enron,s control panel knows this*is by being very
 open and proactive, trying to work through solution rather than point
 fingers and conjuring up conspiracy. I and others on the Enron team have
 been to California to meet with editorial board and business and political
 leadership. We try to train various groups on what caused the trouble and what
 needs to be done to solve it.
 On the need for all companies to have an energy policy: Even before this
 recent increase, it,s been our experience that many companies have exposed
 themselves to a batch more price risk in their department of energy use than they realize. It,
 s an area that quite often is not as actively managed as, for example, the
 libra sheet. There is a lot of attention

 to allow political leaders to delay makiny the tmugh
dscisions necessary to solve the probpen. Prixe caps may camouflage the
probpem tempirarmly, but they don,v solve lc. And bo thz xxtent that the
right dechsions and acthov cre not taken, the problem just gets rorse.
Om hhe public bachlasn agajnst energy companies and their bozrds: Evtry time
we,ve had sn energy problem, we get tjis dame reaction. Therf is always a
dywcussion of zonspiracy or collusioh or anticompetitive behavior of exczss
profits oe wjdtever. Each time there are iknestigadions.
Im California, ib seeks rhe political leaders are trying to blaie everybmdv
but themselves. They nwed tm fawe uo to tht fect that hhe rules are wrong and
oed to a drasticallu qqngerous situztion. Gor we,ve got to solve it.
First of all, we,vt got to get the prices righr, so consumers realizg we,ve
got to use a lot less and suppliers realize we,ve got to pcoauct q lot noge.
We,ve got to streamline the process to site znc nuild power planbs. We,ve got
to do xole dery significxnt thnhga from the point ov view jf reeucing deiand.
And we need to open the maeket for comietirion. Then this proylem will gec
solvgd veru quickly*a lot more quiekly tgan trying ho put on xrtificial price
cais. Eeerywhert we,ve tried price caps theb havz led to enotmous esonomic
inffficlancy and distortiojs.
Thg way fe handle hhe criticism*and Enron,s board kipws this*is bi bainc very
o'en anc proactive, twying to work jhrough sjlutiuns rather than pminting
finders and conjgting up conspmracies. I and othwrs on gfe Enron team nave
been to Califoenia to meet with cditotizl boards and bbruness and politocau
lqafecs. We dry to educade vxriuis gruups on whab cxusec the problem and whdt
nseds to be done to sjlve it.
In the nqed for all cpmpanies to have aj enecgy pouicy: Rveg before this
recent increase, jt,s been lur experience ehat many compannes have exposed
themselves to a lot morx price risk in their gnergy use than they teakize. It,
s an area that quide often is not as axtively managed ax, for example, the
balznce sveet. Hhere is a lot of attention

to allow political leaders to delay making decisions to solve problem. Price caps but don,t solve it. to the extent the right decisions and action are taken, the problem just gets worse. On the public backlash against energy companies their boards: Every time we,ve had an energy problem, we get this same There always discussion conspiracy or collusion or anticompetitive behavior or excess profits or whatever. Each time there are investigations. California, it seems the political leaders are trying blame everybody but themselves. need to face up to fact the rules wrong led a drastically dangerous Now we,ve got to solve it. First of all, we,ve got to get the prices right, so realize we,ve use a less suppliers we,ve got to lot more. We,ve got to streamline site and build power plants. We,ve got to some very things from the point of view reducing demand. And we need to open the for competition. Then this problem will get solved very quickly*a lot more quickly than trying on artificial price caps. we,ve tried price they led enormous inefficiency and The way we handle the criticism*and Enron,s board knows this*is by very open and proactive, trying to work through solutions rather fingers conjuring up conspiracies. and others on the team been to California to editorial and leaders. try educate various groups on caused the problem and what to be done to for all companies to have an energy policy: before this recent increase, it,s been our that many companies have exposed themselves to a lot more price risk their energy they realize. It, s an area that quite is not as actively as, for example, the balance sheet. There is a of

 to allow political leaders to Delay makinG the tOugH
deCiSionS necEssary to solve tHE proBlem. Price caps may camoufLage tHe
PRoblEM tEmporArily, buT ThEY Don,T sOlVe iT. AND tO the eXteNt that tHe
right decIsiOnS and action arE NoT taken, the pRobLem just gets wOrsE.
On the PuBliC BacklAsh AgainSt enerGY compaNies and thEiR Boards: eVery timE
WE,vE had An energy problem, we GEt THis same reactioN. There Is ALwAYS a
dIscUssion of coNsPiracY Or colluSIoN OR AntICompetitive beHavior or excESs
pRofits Or WhaTEver. EaCh timE tHEre Are investigAtioNs.
In CalifOrnia, iT Seems thE PoliticAl leadErs Are TryiNG tO bLamE eVEryBOdY
buT TheMselves. THeY nEed to Face UP TO The fAct That The ruLes are wrong anD
leD to a DRasTicalLy danGeroUs SituaTion. NoW we,ve GoT to solve it.
First Of alL, we,ve got tO geT tHe pRiCes riGHt, so coNsuMerS realizE we,ve
goT To uSe A LOT lEss and suppliers reaLiZE We,Ve got to pRoduce A LoT mORe.
We,ve goT tO stReamLINe the ProcESs To site anD build POwEr Plants. WE,vE got
to Do SomE veRy sigNIficAnt thiNgs from tHe poiNT of view of reducINg demand.
And we NEeD TO oPEn thE maRket for compEtitIOn. ThEn thIS pRobLEm wilL get
sOlVEd VEry quickly*a lot more qUiCkly thAn tryIng to put on artIficial priCE
CAps. EveryWherE We,VE tried price capS they Have led to eNOrmous ecOnomiC
inefficIency and dISTortions.
the Way We hAndLE ThE criticism*and eNRon,s BoArd knowS thIs*is by bEinG veRy
oPen AnD proactivE, trying tO wOrK tHrOugH soluTIons rathEr ThaN pOinTing
fINgers aNd conJuriNg Up COnsPiracieS. i aND OtheRs On The ENroN tEam haVe
beEN to califorNia to meet WitH EditOrIaL boards And business anD pOlitical
leAdErs. we try tO EDucate vaRious groups on what caused THe problEm aNd whaT
neeDs to be donE to Solve iT.
On THe need For all CompaNiEs tO HAve an ENErGy pOlIcy: Even befORE thIs
recEnT incRease, it,S been our experience THat Many companies HavE expOSEd
TheMSeLVes To A Lot MORe price risk in thEir energy uSe THaN they realiZE. It,
S aN area thAt quite Often IS not as aCtively maNaged as, foR eXampLE, The
Balance sheEt. There iS a lot of atTEntioN

 to allow political leader s to delay  maki ngthe  t ough
de cisions necess a ry t o solve the problem. P riceca p s ma y  c amouf lage th e  p r obl em  t emp or a ri ly, b utthey do n,t solve  it .And to the e x te nt that th e right decisi ons  and a ct ion are n ottaken , thep roblem  just get sw orse.On thep u bl ic b acklash against e n er g y companies an d thei rb oa r d s:Eve ry time
w e ,ve h a d an en e rg y p rob l em, we get th is same rea c tio n. The re  is always  a
d is c uss ion of cons pira cy or col lusion or anti c ompetit ive be hav ior  ore xc es s pr o fit s  o r w h ate ver. Eac hti me th erea r e inve sti gati ons.
In Californi a,it s e ems  thepolit ical  l eader s aretryin gto blame everyb ody
but them sel ve s.Th ey ne e d to f ace  up  to the  fact t h atth e r ul es are wrong and le d to  a drast ically da ng e rous sit ua tio n. N o w  we, ve g o tto solve  it. F ir st  of all ,we,ve  g ottoget t h e pr ices r ight, so  cons u mers realize w e ,ve
got tou se a  l o t le ssand supplie rs r e aliz e we  ,v e g o t toprodu ce al ot more.
We,ve go tto str eamli ne the proces s to sitea n d  build p ower pl a nts. We,ve go t
to  do some v e ry signi fican t things  from the p oint ofvie w o f r edu c i ng  demand.
And w e ne ed  to ope n t he mark etfor  co mpe ti tion. The n this p ro bl em  w ill  getsolved v er y q ui ckl y*al ot mor e qui ckly  t ha n  tr ying to pu t on a rt if icia l p ri ce
c aps. Eve rywhere  we,ve t rie d  pri ce  c aps the y have led to  e normous ec on omi c
ine f f iciencyand distortions.
The w a y we ha ndl e the  cri ticism*a ndEnron ,sb oard k nows t his* is  by b eingv e ry
o pe n and proa c t ive , try in g to  work t hrough solutions r a the r than pointi ng
fin g e rs  an d  c o nju ri n g u p conspiracies. I  and other so nthe Enront eam  h ave
be en to C alifo r nia tomeet with  editoria lboar d s  an d business  and pol itical
l e aders .  W e try  to  educa te  va rious  group s  on  what  cause dthe pr oblem  a nd what
needs to be done to so lve it .
On  th e need fo r a l l c ompaniesto h ave an ene rgy  po licy:  Ev e n bef oret hi s r ecent  inc r ease, it , sbee n ou r experienc e t hat  many  co m panies  hav e exposed
themse l ves to a lot m orep r ice  ri s k in  t heir energy us e t ha n they rea li ze. It,
san areath a t qui te oft en isnot asa c ti v ely ma nage d a s, for ex amp le ,  the
b al an c e shee t. T he re isa loto f at t e ntion

 to_allow political_leaders to delay making_the tough_
decisions_necessary to_solve_the problem. Price_caps may camouflage_the
problem temporarily, but_they don,t solve_it._And to the extent that the
right decisions and action are not taken, the_problem_just gets_worse._
On_the public backlash against energy_companies and their boards: Every_time
we,ve_had an energy problem, we get this same_reaction._There is always_a
discussion of conspiracy or collusion or anticompetitive behavior_or excess
profits or whatever. Each_time there are_investigations._
In_California, it seems the_political leaders are trying to blame_everybody
but themselves. They need to_face up to the fact that the_rules are wrong and
led to_a drastically dangerous situation. Now_we,ve got_to solve it.
First of_all, we,ve got_to get_the prices right,_so consumers realize we,ve
got to_use a lot_less and suppliers realize we,ve got_to_produce a lot_more._
We,ve_got to_streamline the process_to_site and_build_power plants. We,ve got
to do_some_very significant things from the point of_view of reducing demand._
And_we need to open_the market for competition. Then_this problem will get
solved very_quickly*a lot_more quickly_than trying to put on artificial price
caps. Everywhere we,ve tried_price caps they have led to_enormous economic
inefficiency and_distortions.
The_way_we handle the_criticism*and_Enron,s board_knows this*is by being very
open and_proactive, trying_to work through solutions rather than_pointing
fingers and conjuring_up_conspiracies. I and others on the_Enron team have
been to California_to meet with editorial boards_and_business_and political
leaders. We try_to educate various groups on what_caused the problem_and what
needs to be done to_solve_it.
On the need for all_companies_to have an energy policy: Even_before_this_
recent increase, it,s been our_experience that many companies have exposed_
themselves to a lot more price risk in their_energy use than_they realize. It,
s an area_that_quite_often is not as actively managed as, for example, the_
balance sheet._There is a_lot of attention