Ownership of California Transmission System

Jim Steffes suggested that I forward this to you for discussion at the
California Conference call tomorrow.

Steve Walton
----- Forwarded by Steve Walton/HOU/ECT on 02/08/2001 05:08 PM -----

Steve Walton
02/08/2001 04:50 PM

To: James D Steffes/NA/Enron@Enron
cc:
Subject: Ownership of California Transmission System

Jim,

I got a call this afternoon from Paul McCoy, a principal in TransElect. We
spoke to them about being a transmission operator during the E-Trans
consortium discussion last fall. Paul told me that they have been actively
pursuing an offer for the transmission systems of PG&E and SCE as an
alternative to the State of California taking title to the transmission
system as part of the legislative solution. Some of our fellow marketers are
sufficiently concerned about California ownership that they have offered to
provide funding to the effort, not as investors which would taint the
acquisition, but more of grant to assist the effort. Paul did not tell me
who the parties are, but it is probably the "usual suspects" who own
generation in California (my guess).

Paul called to see how we would view this effort. They are interested in the
possibility of our supporting a private acquisition of the transmission
assets, not necessarily financial, but the use of our contacts and personnel
to provide public and private support to such an effort.

As I think about the State owning the transmission system and being the
purchaser of energy, it seems like they are assembling a large vertically
integrated public power utility under the control of the Governor -- de facto
re-regulation only worse. Once the state own the transmission system, I
doubt it would every be privatized.

What are your views? Would Enron be interested in supporting this effort?

Steve