Budget Language on Cal PX

It looks as though the budget language which would unwind the Commission's
recent decision to allow competition with the Cal PX will be passed.
Therefore, in the near term, the Cal PX is the only trading vehicle for the
utilities.

Our lobbyists found NO support in the legislature to buck the language.
Principally because the president of the Commission, Loretta Lynch, was the
one seeking a legislative fix to unwind a decision that her agency issued.
She had greased the skids with both the Republicans and the Democrats to
support the language.

So, as a result, the only thing that the Commission can do at this point is
study the affects of introducing competition with the Cal PX and issue a
report to the legislature by June 1, 2001. Prior to that date, the
Commission cannot implement any decision on this issue. Effectively, by the
time any change would occur, we could be at/or near the end of the transition
period, when the mandatory buy/sell requirement would terminate.

We can encourage the Commission to study this issue and use the time as an
opportunity to educate the Commission(ers) about Enron OnLine. If there were
perceptions that we would not qualify as an exchange, this would be a good
time to dispel that bias. Government Affairs would be happy to work with you
in organizing such an event.