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Enron Mail |
Cc: steven.kean@enron.com, richard.shapiro@enron.com, linda.noske@enron.com
Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable Bcc: steven.kean@enron.com, richard.shapiro@enron.com, linda.noske@enron.com X-From: James D Steffes X-To: Tim Belden, William S Bradford, Michael Tribolet, Christopher F Calger, Jeff Dasovich, Paul Kaufman, Harry Kingerski, James W Lewis, Don Black, Mike D Smith, Vicki Sharp, Robert C Williams, Richard B Sanders, Hap Boyd, Alan Comnes, Steve Walton, Susan J Mara X-cc: Steven J Kean, Richard Shapiro, Linda J Noske X-bcc: X-Folder: \Jeff_Dasovich_June2001\Notes Folders\All documents X-Origin: DASOVICH-J X-FileName: jdasovic.nsf John Bryson from SCE called Jeff Skilling to seek our support for their=20 restructuring MOU before the California Assembly and the CPUC. =20 Steve Kean has asked that I get together a phone call to discuss this=20 proposal and our potential "wish list" that would be necessary for SCE to= =20 earn our support. I would like to set up a call for tomorrow at 12:30 Houston time. The=20 call-in number is 1-800-486-2726 Code 789296 (for US parties). =20 Here is my initial proposal for Enron's list: 1. Full payment of PX Credit to ESP (receivable and going forward) from 1st= =20 Tranche of Securitization & agree to dismiss PX Credit compliant at CPUC. 2. Transmission network operated by West-wide RTO, not California ISO (roll= =20 Cal ISO into larger RTO) OR maybe push for TransElect buying . 3. Clear language on continuation of Direct Access with clarity on Surcharg= e. 4. Full payment to EWC on all charges (receivable and going forward) from 1= st=20 Tranche of Securitization. 5. Back-Up transaction to Transmission Sale =3D SCE should offer the market= =20 (including the State) the ability to buy the Hydro facilities. I'm sure there are others. Maybe we want to be involved in a QF=20 restructuring deal? The plan is for Enron to try and respond to SCE by Friday (no later than=20 Monday). =20 Please call me if there are any questions at 713-853-7673.=20 Jim P.S. For those who don't have the MOU, here is a brief overview. The following is an outline of the basic terms of the Southern California= =20 Edison Memorandum of Understanding: ? Commitment to Provide Power =01) SCE will keep its current generation pla= nts=20 and other generation assets and commit them to provide power on a regulated= =20 cost-of-service basis for 10 years. ? Dedication of Power =01) Edison International will commit the entire outp= ut of=20 Sunrise (one of Edison International=01,s non-regulated generating faciliti= es)=20 to the State on a fixed price basis for 10 years. Phase I of Sunrise is to = be=20 brought online by August 15, 2001. If not brought online by August 15, 2001= ,=20 Edison International shall be assessed a $2 million penalty. ? Transmission Sale =01) SCE will sell to the State its transmission assets= for=20 approximately $2.76 billion (2.3 times the net book value of the assets),= =20 subject to certain adjustments. Of the $2.76 billion, the $1.5 billion gain= =20 on sale, will be used to reduce SCE=01,s net undercollected amount as of Ja= nuary=20 31, 2001. In connection with the purchase, the State will also assume certa= in=20 liabilities associated with the transmission assets. ? Backup Transaction =01) If the transmission sale does not occur within tw= o=20 years for reasons beyond the parties=01, control, then if the State elects,= SCE=20 shall sell to the State SCE=01,s hydro generation assets. If the hydro asse= ts=20 are not worth $1.5 billion, then SCE will also sell the state after Decembe= r=20 31, 2010 enough below-market-price-power to make up the shortfall. ? Conservation Property =01) SCE shall grant perpetual conservation easemen= ts to=20 the State covering approximately 260,000 acres of its Big Creek hydroelectr= ic=20 related lands and 825 acres of its Eastern Sierra hydroelectric related=20 lands. Some of the land may be deeded in fee. ? Contribution by Edison International =01) Edison International will refun= d to=20 SCE not less than $400 million. This money will consist of a refund of=20 approximately $293 million in estimated 2000 quarterly tax payments plus=20 approximately $197 million in federal loss carryback tax savings. ? Investment =01) Edison International and SCE will invest not less than $3= =20 billion over the next 5 years in capital improvements for SCE. ? Litigation =01) SCE shall dismiss certain claims, including its takings a= nd=20 filed rate doctrine cases. ? CPUC Regulation =01) CPUC shall continue to regulate SCE using historical= =20 principles of ratemaking. ? Payment for Portion of QF Drop-off =01) SCE shall pay an amount that=20 represents that portion of the net short from January 18, 2001 to April 1,= =20 2001 that is attributable to QF=01,s not selling to SCE (due to SCE=01,s fa= ilure to=20 pay the QF=01,s). SCE will securitize this amount. ? Securitization =01) SCE shall securitize its full net undercollected amou= nt=20 (approx. $3.5 billion). The securitization shall occur in two tranches (i.= e.=20 two different nonbypassable dedicated rate components). ? The first tranche will occur after the passage of legislation and the=20 signing of the definitive agreements and will cover the net undercollected= =20 amount, less the gain on sale, plus interest on certain obligations in the= =20 net undercollected amount. ? The second tranche would be triggered if the transmission sale does not= =20 occur within two years. Accordingly, the second tranche would not show up = in=20 rates for two years, if at all. ? Buying the Net Short =01) The State will be required to buy the net short= =20 through December 31, 2002. After 2002 SCE will be responsible for covering= =20 the net short. ? Investment Recovery =01) SCE shall have an authorized rate of return that= will=20 not drop below its current rte (11.6%) during the 10 year cost of service= =20 ratemaking period. ? Next Steps (Definitive Agreements and CPUC Action): ? Definitive Agreements =01) Once the MOU is signed, the next stage is to= =20 negotiate definitive agreements which contain the specific terms of the=20 transmission sale, as well as the specific terms of the various other relat= ed=20 agreements (e.g., the O&M Agreement, Transmission Services Agreement and th= e=20 Facilities Services Agreement). ? CPUC Action =01) Prior to entering into the definitive agreements, the CP= UC=20 must undertake certain actions (which include: establishing mechanisms for= =20 preapproval of procurement costs and URG costs, deferring SCE=01,s general = rate=20 case until 2003, granting SCE some relief from direct access credits and=20 clarifying the first priority condition in the holding company act).
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