Direct Access - Potential Cost Savings

This memo lays out some numbers with regard to the question raised earlier
this week concerning the savings to CDWR if direct access were to be
reinstated.

Using available annual mWh sales figures for PG&E and SCE (1999), commercial
and industrial sales as a percentage of total sales is 63% for PGE and 68%
for SCE, or, in terms of annual mWh purchases, approximately 63,900,000 kWh
for PGE and 61,200,000 kWh for SCE for a total C&I purchase requirement of
125,100,000 kWh.

Assuming that every kWh of C&I load that switches to direct access is an
equivalent reduction in CDWR purchase requirements (which assumes that CDWR
fills 100% of the net short) and bracketing CDWR per unit purchase costs
between its published portfolio cost and an assumed market price of $250 per
kWh, the following cost reductions (stated on a monthly basis) are shown
below:

Per Month Purchase Cost Reduction
Switch to Direct Access CDWR Portfolio Cost - $79/mWh Market Price - $250/mWh
5% $41mm $130 mm
10% $ 82 mm $260 mm
15% $123 mm $390 mm
20% $164 mm $420 mm

If you have any questions with regard to the above or require further
analysis please advise.