Karen:
See highlited section of story below.  PG&E's got it right.  Recall that DWR 
was only buying power that it determined was "priced reasonably."  
Consequently, the net short wasn't getting picked up.  That meant that the 
ISO would have to go to the real-time market to close the gap.  The ISO would 
then charge the utilities for the power purchased.  Recall that Bob Glynn 
referenced the $300 MM/month that continued to pile up on PG&E's balance 
sheet as one of the several reasons that PG&E put itself into bankruptcy.  
Now that PG&E's in bankruptcy, the state is now responsible for the full net 
short, and can't continue to sluff it off onto PG&E's balance sheet.  So it's 
therefore no surprise that the State's daily bill for power purchases has 
increased dramatically---just not for any of the bogus reasons cited by 
Governor Backbone.

Best,
Jeff
----- Forwarded by Jeff Dasovich/NA/Enron on 04/20/2001 12:31 PM -----

	Ray Alvarez
	04/20/2001 09:56 AM
		 
		 To: Steve Walton/HOU/ECT@ECT, Susan J Mara/NA/Enron@ENRON, Alan 
Comnes/PDX/ECT@ECT, Leslie Lawner/NA/Enron@Enron, Rebecca W 
Cantrell/HOU/ECT@ECT, Donna Fulton/Corp/Enron@ENRON, Jeff 
Dasovich/NA/Enron@Enron, Christi L Nicolay/HOU/ECT@ECT, James D 
Steffes/NA/Enron@Enron, Tim Belden/HOU/ECT@ECT
		 cc: 
		 Subject: CA legislature in doubt

FYI.  Ray

NGI's Daily Gas Price Index 
published : April 20, 2001
CA Governor, Regulators Push on, but Legislature Raises Doubts 
Two certainties prevailed in California's blighted energy landscape Thursday: 
wholesale power bills are getting bigger and state regulators are trying 
harder to salvage Gov. Gray Davis' deal with Southern California Edison Co. 
But in the state legislature from which the ultimate solutions must come 
there was growing skepticism, despite a series of meetings with the governor 
earlier in the week. 
While nervousness over the state's electricity bill and the prospect of 
insufficient power supplies this summer prevailed, Davis met with 25 members 
of California's congressional delegation at a Los Angeles airport hotel to 
press his case for federal actions to resolve the seemingly endless energy 
dilemma. 
The California Public Utilities Commission has ordered a statewide 
investigation of the contractual obligations of the almost 700 small 
(qualifying facility) QF generators toward the utilities, but most of the 
five-member commission's activity was focused outside its regular business 
meeting in San Francisco. CPUC President Loretta Lynch offered empathy toward 
Edison's financial plight and renewed pleas for federal regulators to provide 
wholesale price relief. 
"I have committed that the CPUC will expeditiously review those provisions of 
(Edison's proposed agreement) that require CPUC resolution, and I have taken 
steps to begin that process," Lynch said in a prepared statement released 
Wednesday. "In the meantime, I commit to reviewing on a priority basis any 
and all proposals that promote the financial health of California utilities 
and the interests of its consumers." 
Davis and some of the CPUC commissioners have been complaining that the cost 
of the state's daily purchases of wholesale power on the spot market have 
increased from about $50 million to more than $70 million daily since the 
April 6 bankruptcy filing of Pacific Gas and Electric Co., but the utility 
challenged the conclusion that the court filing caused the latest price 
increases. 
"While it is understandable, even laudable, that the governor would want to 
fully explain the downsides of utility bankruptcy, this claim is simply not 
accurate," said PG&E utility spokesperson John Nelson. He argued that the 
increase in state payments for power reflect that the state water resources 
department (DWR) now is covering all spot purchases, including the often 
costly real-time emergency purchases by the state's transmission grid 
operator, Cal-ISO. 
Thus, PG&E's spokesperson said the more likely cause of the increased power 
bill lies with recent moves by federal regulators and Cal-ISO, noting that 
the state grid operator should only sell to "creditworthy" entities. These 
moves were done independent of the PG&E bankruptcy filing, Nelson said. 
As the daily bill for power goes up, draining the state treasury more 
quickly, pressure mounts for a resolution to the utility financial situation. 
But the legislature has expressed skepticism toward the governor's proposed 
deal with Edison. State Senate Leader John Burton (D-San Francisco) told news 
media Wednesday that bankruptcy might be the best approach for Edison. 
In adopting the new investigations of QF generators, the CPUC's commissioners 
acknowledged that eventually the issue of back payments to the small 
generators needs to be addressed, particularly to a group representing up to 
3,000 MW collectively.
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