Message-ID: <19474206.1075840902595.JavaMail.evans@thyme>
Date: Mon, 9 Apr 2001 22:09:00 -0700 (PDT)
From: james.steffes@enron.com
To: john.lavorato@enron.com, louise.kitchen@enron.com, mark.frevert@enron.com, 
	greg.whalley@enron.com, tim.belden@enron.com, 
	phillip.allen@enron.com, christopher.calger@enron.com, 
	steven.kean@enron.com, richard.shapiro@enron.com, 
	ray.alvarez@enron.com
Subject: Summary of the Socal Edison MOU Announced Today (4.9.01)
Mime-Version: 1.0
Content-Type: text/plain; charset=ANSI_X3.4-1968
Content-Transfer-Encoding: quoted-printable
X-From: James D Steffes <James D Steffes/NA/Enron@ENRON>
X-To: John J Lavorato <John J Lavorato/Enron@EnronXGate>, Louise Kitchen <Louise Kitchen/HOU/ECT@ECT>, Mark Frevert <Mark Frevert/Enron@EnronXGate>, Greg Whalley <Greg Whalley/HOU/ECT@ECT>, Tim Belden <Tim Belden/HOU/ECT@ECT>, Phillip K Allen <Phillip K Allen/HOU/ECT@ECT>, Christopher F Calger <Christopher F Calger/PDX/ECT@ECT>, Steven J Kean <Steven J Kean/NA/Enron@Enron>, Richard Shapiro <Richard Shapiro/NA/Enron@Enron>, Ray Alvarez <Ray Alvarez/NA/Enron@ENRON>
X-cc: 
X-bcc: 
X-Folder: \ExMerge - Kitchen, Louise\'Americas\Regulatory
X-Origin: KITCHEN-L
X-FileName: louise kitchen 2-7-02.pst

Agreement in principle.  Still need to negotiate definitive contracts.  Man=
y parties still have to agree with this proposed solution before its final =
(including the Legislature).  This looks very good for SCE.

Jim

---------------------- Forwarded by James D Steffes/NA/Enron on 04/09/2001 =
07:03 PM ---------------------------
From:=09Jeff Dasovich on 04/09/2001 07:00 PM
Sent by:=09Jeff Dasovich
To:=09Alan 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 Moffett=
/HOU/EES@EES, Cathy Corbin/HOU/EES@EES, Chris H Foster/HOU/ECT@ECT, Christi=
na Liscano/HOU/EES@EES, Craig H Sutter/HOU/EES@EES, Dan Leff/HOU/EES@EES, D=
ebora Whitehead/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Don Black/HOU/EE=
S@EES, Dorothy Youngblood/HOU/ECT@ECT, Douglas Huth/HOU/EES@EES, Edward Sac=
ks/Corp/Enron@ENRON, Eric Melvin/HOU/EES@EES, Erika Dupre/HOU/EES@EES, Evan=
 Hughes/HOU/EES@EES, Fran Deltoro/HOU/EES@EES, Gayle W Muench/HOU/EES@EES, =
Ginger Dernehl/NA/Enron@ENRON, Gordon Savage/HOU/EES@EES, Harold G Buchanan=
/HOU/EES@EES, Harry Kingerski/NA/Enron@ENRON, Iris Waser/HOU/EES@EES, James=
 D Steffes/NA/Enron@ENRON, James W Lewis/HOU/EES@EES, James Wright/Western =
Region/The Bentley Company@Exchange, Jeff Messina/HOU/EES@EES, Jeremy Blach=
man/HOU/EES@EES, Jess Hewitt/HOU/EES@EES, Joe Hartsoe/Corp/Enron@ENRON, Kar=
en Denne/Corp/Enron@ENRON, Kathy Bass/HOU/EES@EES, Kathy Dodgen/HOU/EES@EES=
, Ken Gustafson/HOU/EES@EES, Kevin Hughes/HOU/EES@EES, Leasa Lopez/HOU/EES@=
EES, Leticia Botello/HOU/EES@EES, Mark S Muller/HOU/EES@EES, Marsha Suggs/H=
OU/EES@EES, Marty Sunde/HOU/EES@EES, Meredith M Eggleston/HOU/EES@EES, Mich=
ael Etringer/HOU/ECT@ECT, Michael Mann/HOU/EES@EES, Michelle D Cisneros/HOU=
/ECT@ECT, mpalmer@enron.com, Neil Bresnan/HOU/EES@EES, Neil Hong/HOU/EES@EE=
S, Paul Kaufman/PDX/ECT@ECT, Paula Warren/HOU/EES@EES, Richard L Zdunkewicz=
/HOU/EES@EES, Richard Leibert/HOU/EES@EES, Richard Shapiro/NA/Enron@ENRON, =
Rita Hennessy/NA/Enron@ENRON, Roger Yang/SFO/EES@EES, Rosalinda Tijerina/HO=
U/EES@EES, Sandra McCubbin/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, =
Scott Gahn/HOU/EES@EES, Scott Stoness/HOU/EES@EES, Sharon Dick/HOU/EES@EES,=
 skean@enron.com, Tanya Leslie/HOU/EES@EES, Tasha Lair/HOU/EES@EES, Ted Mur=
phy/HOU/ECT@ECT, Terri Greenlee/NA/Enron@ENRON, Tim Belden/HOU/ECT@ECT, Ton=
y Spruiell/HOU/EES@EES, Vicki Sharp/HOU/EES@EES, Vladimir Gorny/HOU/ECT@ECT=
, Wanda Curry/HOU/EES@EES, William S Bradford/HOU/ECT@ECT, Kathryn Corbally=
/Corp/Enron@ENRON, Jubran Whalan/HOU/EES@EES, triley@enron.com, Richard B S=
anders/HOU/ECT@ECT, Robert C Williams/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, =
Greg Wolfe/HOU/ECT@ECT, James Wright/Western Region/The Bentley Company@Exc=
hange, Dirk vanUlden/Western Region/The Bentley Company@Exchange, Steve Wal=
ker/SFO/EES@EES, Jennifer Rudolph/HOU/EES@EES, Martin Wenzel/SFO/HOU/EES@EE=
S, Douglas Condon/SFO/EES@EES, wgang@enron.com, Scott Govenar <sgovenar@gov=
adv.com>, Hedy Govenar <hgovenar@govadv.com> @ ENRON, jklauber@llgm.com, Mi=
ke D Smith/HOU/EES@EES, John Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, J=
anel Guerrero/Corp/Enron@Enron, Eric Letke/DUB/EES@EES, Richard B Sanders/H=
OU/ECT@ECT, gfergus@brobeck.com, Michael Tribolet/ENRON@enronXgate, Robert =
Frank/NA/Enron@Enron, Richard B Sanders/HOU/ECT@ECT, gfergus@brobeck.com, S=
usan J Mara/NA/Enron@ENRON, Mercy Gil/Enron@EnronXGate, Jennifer Thome/NA/E=
nron@Enron, David Leboe/HOU/ECT@ECT
cc:=09=20

Subject:=09Summary of the MOU

The following is an outline of the basic terms of the Southern California E=
dison Memorandum of Understanding:

?=09Commitment to Provide Power - SCE will keep its current generation plan=
ts and other generation assets and commit them to provide power on a regula=
ted cost-of-service basis for 10 years.
?=09Dedication of Power - Edison International will commit the entire outpu=
t of Sunrise (one of Edison International's non-regulated generating facili=
ties) 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.
?=09Transmission 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 g=
ain on sale, will be used to reduce SCE's net undercollected amount as of J=
anuary 31, 2001. In connection with the purchase, the State will also assum=
e certain liabilities associated with the transmission assets.
?=09Backup Transaction - If the transmission sale does not occur within two=
 years for reasons beyond the parties' control, then if the State elects, S=
CE shall sell to the State SCE's hydro generation assets. If the hydro asse=
ts are not worth $1.5 billion, then SCE will also sell the state after Dece=
mber 31, 2010 enough below-market-price-power to make up the shortfall.
?=09Conservation Property - SCE shall grant perpetual conservation easement=
s to the State covering approximately 260,000 acres of its Big Creek hydroe=
lectric related lands and 825 acres of its Eastern Sierra hydroelectric rel=
ated lands.  Some of the land may be deeded in fee.
?=09Contribution 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 a=
pproximately $197 million in federal loss carryback tax savings.
?=09Investment - Edison International and SCE will invest not less than $3 =
billion over the next 5 years in capital improvements for SCE.
?=09Litigation - SCE shall dismiss certain claims, including its takings an=
d filed rate doctrine cases.
?=09CPUC Regulation - CPUC shall continue to regulate SCE using historical =
principles of ratemaking.
?=09Payment for Portion of QF Drop-off - SCE shall pay an amount that repre=
sents 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 pa=
y the QF's).  SCE will securitize this amount.
?=09Securitization - SCE shall securitize its full net undercollected amoun=
t (approx. $3.5 billion).  The securitization shall occur in two tranches (=
i.e. two different nonbypassable dedicated rate components).

?=09The first tranche will occur after the passage of legislation and the s=
igning of the definitive agreements and will cover the net undercollected a=
mount, less the gain on sale, plus interest on certain obligations in the n=
et undercollected amount.
?=09The 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.

?=09Buying 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.
?=09Investment 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 serv=
ice ratemaking period.
?=09Next Steps (Definitive Agreements and CPUC Action):

?=09Definitive Agreements - Once the MOU is signed, the next stage is to ne=
gotiate definitive agreements which contain the specific terms of the trans=
mission sale, as well as the specific terms of the various other related ag=
reements (e.g., the O&M Agreement, Transmission Services Agreement and the =
Facilities Services Agreement).
?=09CPUC Action - Prior to entering into the definitive agreements, the CPU=
C must undertake certain actions (which include: establishing mechanisms fo=
r preapproval of procurement costs and URG costs, deferring SCE's general r=
ate case until 2003, granting SCE some relief from direct access credits an=
d clarifying the first priority condition in the holding company act).