PX Credit pricing proposal - for DISCUSSION purposes

Please consider the following as a proposal for PX Credit pricing. Harry,
Gord, Jeanne and Bob Weisenmiller (and Jeff if he's available) will be
discussing regulatory strategy next steps either today or tomorrow. At that
time, we'll discuss the best way to put forward our proposal. Jeanne will
let us know today when Bob will be available for our next conference call.
Please call me or Gord with comments on this proposal whenever you can so we
can keep the wheels in motion.

I propose that our first goal be to stop the unilateral change in PX credit
calculation that PG&E has put forward. Let's consider the following as a PX
credit calculation:

a) provide a share of the existing utility (and state) owned and QF
generation to all customers, i.e. energy "in kind" is provided
b) calculate a credit based on a reasonable market price for the remaining
generation needs

We propose that the market price be based on the Dow Jones Electricity Index.
The principles behind an index selection are:
an observed correlation between the index and prices paid in the California
market (eliminates SP15 and NP15); and,
be representative of prices that can be obtained by ESP's (companies that do
not have the credit backing of a state agency).
Please note that there are many details behind the implementation of an
index, e.g. load shaping and on/off peak pricing, but these points are best
left for a full proposal submitted in evidence (due Feb.5).

example.
(1) calculate PX credit

% of kWh sales to CA customers source PX credit provided
40% embedded generation <provide kWh<
20% QF contracted gen. <provide kWh<
40% use market index $150/kWh*
<40% x $150 = $60<

(2) sample invoice from PG&E to Enron (in $/MWh)

bundled tariff $100
surcharge $10
PX Credit <60% kWh provided<
($60)CR
bill to Enron $$50

(3) sample invoice from Enron to DA customer

cost to Enron of energy purchases for 40% load $60
pass on bill from PG&E $50
bill to DA customer $110

Conclusion:
The customer is held free from a rate increase during transition, as per
AB1860.
We set the precedent that all customers, including DA, have rights to
generation that will still be effectively "regulated generation".