Message-ID: <3389774.1075840897840.JavaMail.evans@thyme>
Date: Fri, 10 Aug 2001 14:43:33 -0700 (PDT)
From: kristin.walsh@enron.com
To: john.lavorato@enron.com, louise.kitchen@enron.com, david.delainey@enron.com
Subject: Direct Access 8/10/01
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	tim.heizenrader@enron.com, j.kaminski@enron.com, j..kean@enron.com, 
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	claudio.ribeiro@enron.com, richard.shapiro@enron.com, 
	d..steffes@enron.com, mark.tawney@enron.com, scott.tholan@enron.com, 
	britt.whitman@enron.com, lloyd.will@enron.com, alan.comnes@enron.com, 
	rogers.herndon@enron.com, james.lewis@enron.com, don.black@enron.com, 
	kelly.holman@enron.com, dana.davis@enron.com, j..sturm@enron.com, 
	doug.gilbert-smith@enron.com, b..sanders@enron.com, 
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	david.cromley@enron.com, robert.johnston@enron.com, 
	kevin.golden@enron.com
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X-From: Walsh, Kristin </O=ENRON/OU=NA/CN=RECIPIENTS/CN=KWALSH>
X-To: Lavorato, John </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jlavora>, Kitchen, Louise </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Lkitchen>, Delainey, David </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=28fc501b-22d3a001-62569fb-57caaa>
X-cc: Calger, Christopher F. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Ccalger>, Yoder, Christian </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Cyoder>, Hall, Steve C. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Shall4>, Swerzbin, Mike </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Mswerzb>, Allen, Phillip K. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Pallen>, Dasovich, Jeff </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jdasovic>, Gaskill, Chris </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Cgaskill>, Grigsby, Mike </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Mgrigsb>, Heizenrader, Tim </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Theizen>, Kaminski, Vince J </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Vkamins>, Kean, Steven J. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Skean>, Milnthorp, Rob </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Rmilnth>, Presto, Kevin M. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Kpresto>, Ribeiro, Claudio </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Cribeiro>, Shapiro, Richard </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Rshapiro>, Steffes, James D. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jsteffe>, Tawney, Mark </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Mtawney>, Tholan, Scott </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Stholan>, Whitman, Britt </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Bwhitman>, Will, Lloyd </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Lwill>, Comnes, Alan </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Acomnes>, Herndon, Rogers </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Rherndo>, Lewis, James </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=160d115f-e3a12228-862564cd-53ae9a>, Black, Don </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=3fb677c9-5533a11e-8625699d-71b01e>, Holman, Kelly </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Kholman>, Davis, Mark Dana </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=ab167e54-8eec877d-862564b5-7715f6>, Sturm, Fletcher J. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Fsturm>, Gilbert-smith, Doug </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Dsmith3>, Sanders, Richard B. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Rsander>, Edison, Andrew </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Aedison>, Holman, Kelly </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Kholman>, Turner, Nancy </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Nturner2>, Belden, Tim </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Tbelden>, Brindle, John </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jbrindle>, Cromley, David </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Dcromley>, Johnston, Robert </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Rjohnst>, Golden, Kevin </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=4963c790-86fb6c6-8825695e-6afb38>
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Below is a brief summary of the main issues regarding Direct Access.  We wi=
ll continue to the follow the progress and keep you updated.=20

Summary:
Direct access was designed to break utility monopolies and was a key compon=
ent of California's 1996 deregulation law.  Under this concept, all custome=
rs could directly access an energy provider other than their regulated util=
ity.  The debate over direct access is at the heart of a complicated attemp=
t to solve California's costly power crisis.  It will determine whether bus=
inesses, with residential customers, pay for the bulk of the state's future=
 energy purchases. It also could determine whether Southern California Edis=
on, the state's cash-strapped No. 2 utility, will avoid bankruptcy, and whe=
ther deregulation will survive in any form.

Big businesses, free-market advocates and alternative energy providers have=
 lobbied state legislators to find a way to keep so-called "direct access".=
  Now, as the state prepares to sell $13.4 billion in bonds to begin paying=
 off its debt, legislators and energy officials say they must prevent big b=
usinesses from wiggling out of that obligation by closing off their direct-=
access escape route.  Regulators are concerned that if businesses flee the =
system, the state will be stuck with too much electricity under long-term e=
lectricity contracts through 2021.  That would mean residential ratepayers =
would be stuck paying the bulk of the $43 billion in future power costs, a =
point that has enraged consumer groups.  Currently, only about 88,000 custo=
mers buy their energy through direct access (per CEC statistics), including=
 about 10,000 large commercial/industrial customers, and about 78,000 resid=
ences.  Alternative service providers shifted most of their customers back =
to California's primary utility suppliers (SoCal Ed., PG&E, SDG&E) earlier =
this year when prices skyrocketed and they could no longer compete with uti=
lity rates capped by the Legislature. =20

California legislators argue that direct access is the keystone of the late=
st Edison bailout plan, sponsored by Assembly Speaker Pro Tem Fred Keeley. =
Under the plan, the 3,600 largest businesses would agree to pay $3.1 billio=
n of Edison's debts over 15 years.  In exchange, businesses would be allowe=
d to secure their own power contracts by 2003, but not without first paying=
 an "exit fee."  The fees and which parties would be exempt remain undeterm=
ined, however, they would include a surcharge or a complicated calculation =
in which businesses would pay a percentage of future energy purchases.  It =
is likely that whatever compromise legislators are able to reach regarding =
direct access, California's business community will have extreme difficulty=
 accepting the terms.

To ensure their efforts at resolving the direct access dilemma and abate fe=
ars of a collapsing state budget, lawmakers have gone so far as to introduc=
e two bills, (one sponsored by Sen. Bowen and defeated in July, and a secon=
d by Assemblyman Dave Kelley,) that would rescind language in previous legi=
slation that authorized the Public Utilities Commission to block direct acc=
ess.  The California PUC has thus far stayed a decision on the matter, but =
is expected to rule by August 23rd.

Complicating the issue is Wall Street.  The state's bankers, led by J.P Mor=
gan, are nervous about selling as much as $13.4 billion in planned state bo=
nds if businesses (currently the largest ratepayers in the state, after gov=
ernments) find a way out of the system.  The bonds are meant to repay the s=
tate for $8.2 billion in power-buying costs so far this year and to cover s=
ome future costs.  Business and residential electricity customers would rep=
ay the bonds through a surcharge on their utility bills.  If businesses wer=
e allowed to sign on with outside energy providers, that revenue stream wou=
ld be in jeopardy.