Here are some thoughts on what our message may be. 

Unclear how this is going to increase supply, decrease demand, and increase 
customer choice.  Still doesn't make sense to us to have the state buy a 
crumbling transmission network instead of school lunches.

We don't have enough details.  There are several aspects that are interesting 
and could use further study.  Governor Davis needs to make the details public 
as soon as possible so people can understand the full implications.  For 
instance, what happens to DWR contracts?  Will they be assigned to SCE?  Will 
customers have the right to choose going forward?

The recent events highlight the critical need to make sure that customers can 
make their own energy decisions going forward.  We know that Government 
doesn't know how to get this right.  The right answer is giving customers 
more choices, not fewer.

Can't endorse it until we know if our bills are going to be paid in full.  If 
the bills aren't paid in full, highly likely that we'll see involuntary 
bankruptcy.

Too bad that this deal wasn't done earlier.  It could have saved alot of 
money and pain.

Why do you need to include the transmission purchase in this deal?  May never 
happen.  Make it easy - just deal with the under collection through 
securitization and throught the EIX refund to SCE and get on with it.

 
Jim

---------------------- Forwarded by James D Steffes/NA/Enron on 04/09/2001 
07:24 PM ---------------------------
From: Jeff Dasovich on 04/09/2001 07:00 PM
Sent by: Jeff Dasovich
To: Alan Comnes/PDX/ECT@ECT, Angela Schwarz/HOU/EES@EES, Beverly 
Aden/HOU/EES@EES, Bill Votaw/HOU/EES@EES, Brenda Barreda/HOU/EES@EES, Carol 
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Huth/HOU/EES@EES, Edward Sacks/Corp/Enron@ENRON, Eric Melvin/HOU/EES@EES, 
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Gayle W Muench/HOU/EES@EES, Ginger Dernehl/NA/Enron@ENRON, Gordon 
Savage/HOU/EES@EES, Harold G Buchanan/HOU/EES@EES, Harry 
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cc:  

Subject: Summary of the MOU

The following is an outline of the basic terms of the Southern California 
Edison Memorandum of Understanding:

? Commitment to Provide Power ) SCE will keep its current generation plants 
and other generation assets and commit them to provide power on a regulated 
cost-of-service basis for 10 years.
? Dedication of Power ) Edison International will commit the entire output of 
Sunrise (one of Edison International,s non-regulated generating facilities) 
to the State on a fixed price basis for 10 years. Phase I of Sunrise is to be 
brought online by August 15, 2001. If not brought online by August 15, 2001, 
Edison International shall be assessed a $2 million penalty.
? Transmission Sale ) SCE will sell to the State its transmission assets for 
approximately $2.76 billion (2.3 times the net book value of the assets), 
subject to certain adjustments. Of the $2.76 billion, the $1.5 billion gain 
on sale, will be used to reduce SCE,s net undercollected amount as of January 
31, 2001. In connection with the purchase, the State will also assume certain 
liabilities associated with the transmission assets.
? Backup Transaction ) If the transmission sale does not occur within two 
years for reasons beyond the parties, control, then if the State elects, SCE 
shall sell to the State SCE,s hydro generation assets. If the hydro assets 
are not worth $1.5 billion, then SCE will also sell the state after December 
31, 2010 enough below-market-price-power to make up the shortfall.
? Conservation Property ) SCE shall grant perpetual conservation easements to 
the State covering approximately 260,000 acres of its Big Creek hydroelectric 
related lands and 825 acres of its Eastern Sierra hydroelectric related 
lands.  Some of the land may be deeded in fee.
? Contribution by Edison International ) Edison International will refund to 
SCE not less than $400 million.  This money will consist of a refund of 
approximately $293 million in estimated 2000 quarterly tax payments plus 
approximately $197 million in federal loss carryback tax savings.
? Investment ) Edison International and SCE will invest not less than $3 
billion over the next 5 years in capital improvements for SCE.
? Litigation ) SCE shall dismiss certain claims, including its takings and 
filed rate doctrine cases.
? CPUC Regulation ) CPUC shall continue to regulate SCE using historical 
principles of ratemaking.
? Payment for Portion of QF Drop-off ) SCE shall pay an amount that 
represents that portion of the net short from January 18, 2001 to April 1, 
2001 that is attributable to QF,s not selling to SCE (due to SCE,s failure to 
pay the QF,s).  SCE will securitize this amount.
? Securitization ) SCE shall securitize its full net undercollected amount 
(approx. $3.5 billion).  The securitization shall occur in two tranches (i.e. 
two different nonbypassable dedicated rate components).

? The first tranche will occur after the passage of legislation and the 
signing of the definitive agreements and will cover the net undercollected 
amount, less the gain on sale, plus interest on certain obligations in the 
net undercollected amount.
? The second tranche would be triggered if the transmission sale does not 
occur within two years.  Accordingly, the second tranche would not show up in 
rates for two years, if at all.

? Buying the Net Short ) The State will be required to buy the net short 
through December 31, 2002.  After 2002 SCE will be responsible for covering 
the net short.
? Investment Recovery ) SCE shall have an authorized rate of return that will 
not drop below its current rte (11.6%) during the 10 year cost of service 
ratemaking period.
? Next Steps (Definitive Agreements and CPUC Action):

? Definitive Agreements ) Once the MOU is signed, the next stage is to 
negotiate definitive agreements which contain the specific terms of the 
transmission sale, as well as the specific terms of the various other related 
agreements (e.g., the O&M Agreement, Transmission Services Agreement and the 
Facilities Services Agreement).
? CPUC Action ) Prior to entering into the definitive agreements, the CPUC 
must undertake certain actions (which include: establishing mechanisms for 
preapproval of procurement costs and URG costs, deferring SCE,s general rate 
case until 2003, granting SCE some relief from direct access credits and 
clarifying the first priority condition in the holding company act).
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