Reporting on CPUC Ability to Change Direct Access Rules

As we discussed in our special call last week, I asked Brian Cragg from
Goodin McBride to look into the issue of what, if anything, the CPUC can do
in lieu of suspending direct access.

ABX 1 says the CPUC "shall suspend" DA, but does not give any time line for
doing so, nor any criterita to use in making the determination to suspend
it. This gives the CPUC ample ability to delay suspending DA, especially
while bills affecting DA are in play in Sacramento. The President could have
her own investigation or propose her own solutions -- all the while delaying
the suspension. Brian also thought she could possibly put her own DA plan in
place -- although he said it was a "stretch." Brian said she could, for
example, argue that limiting DA to the net short position was a way of
implementing ABX 1. He felt that adding an exit fee as well was , however,
stretching the concept a bit too far. Nonethless, limiting DA to a net short
position could be argued to be within her existing authority under the law.
She could also institute an "open season" through some defined date, such as
Jan 1, 2002, and suspend DA thereafter.

She could take this action subject to the passage of superceding legislation
-- which, of course, could either kill DA altogether or implement some
combination of exit fee/DAopen season/DA limitation.

Let's discuss strategy on our next call.

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854