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----- Forwarded by Jeff Dasovich/NA/Enron on 05/22/2001 07:46 PM -----
"Ken Smith" <ken@kdscommunications.com< 05/22/2001 07:27 PM Please respond to "Ken Smith" To: "Hedy Govenar" <hgovenar@govadv.com<, "Mike Day" <MDay@GMSSR.com<, "Bev Hansen" <bhansen@lhom.com<, "Jeff Dasovich" <jdasovic@enron.com<, "Susan J Mara" <smara@enron.com<, "Paul Kaufman" <paul.kaufman@enron.com<, "Michael McDonald" <Michael.McDonald@enron.com<, "Sandra McCubbin" <Sandra.McCubbin@enron.com<, "Rick Shapiro" <rshapiro@enron.com<, "Jim Steffes" <james.d.steffes@enron.com<, "Alan Comnes" <acomnes@enron.com<, "Steven Kean" <Steven.J.Kean@enron.com<, "Karen Denne" <kdenne@enron.com<, <Harry.Kingerski@enron.com<, "Leslie Lawner" <Leslie.Lawner@enron.com<, "Robert Frank" <rfrank@enron.com<, "Janel Guerrero" <Janel.Guerrero@enron.com<, "Miyung Buster" <Miyung.Buster@enron.com<, "Jennifer Thome" <Jennifer.Thome@enron.com<, "Eric Letke" <eletke@enron.com<, "Mary Schoen" <Mary.Schoen@enron.com<, "David Leboe" <David.Leboe@ENRON.com<, "Ban Sharma" <ban.sharma@enron.com<, <Mark.Palmer@enron.com< cc: Subject: Burton Presentation and Press Conference The following are summaries of today's appearance by Sen. John Burton to the Sacramento Press Club and of his news conference this afternoon announcing a lawsuit against FERC. John Burton held what amounted mostly to a Q&A session at a lunch with the Sacramento Press Club today. He started by talking about the Edison MOU, which he said will be assigned to the Senate Utility Committee for review, the Judiciary Committee will look at the legal elements, and the Natural Resources Committee will look at issues surrounding easements. (One columnist commented that Burton would "love it to death," meaning it would get so much attention it will be hard for it to advance.) The MOU, he said, includes language that eliminates oversight by the PUC. He said that will not be the case when it leaves the Senate. Burton is obviously troubled by the MOU; he said "some people" say it doesn't just make Edison creditworthy, it makes them whole. He said the following would have to take place for the MOU to be acceptable: Back debt must be verified; All creditors must take a 30% "haircut"; The transmission lines would need to be purchased for an amount close to what the governor has mentioned; $400 million (or more) must come from Edison's parent to pay back debt. When asked whether $400 million was enough, he said "no" and that he feels the parent should pay "a ton." That led to a discussion of the dedicated rate component, which he doesn't like. He used the example that if electricity costs $20 and the dedicated rate component is $5, if prices drop to $10 people will unnecessarily pay higher rates. A larger infusion of cash from Edison's parent could eliminate the need for the dedicated rate component. Burton called the dedicated rate component a "big problem" and said it could be the strongest argument for use in an initiative campaign. He said he planned to tell the governor this afternoon that the state should set an acceptable purchase price for power and not pay anything more (note: this is a populist approach that is getting a lot of support from radio talk shows and other media). He later threw out the number $200. The state is going to have blackouts whether or not it pays top dollar, he said, so this is one way he sees to fight back. It's tough medicine, but as he put it, "You've got to take castor oil and it tastes crappy, but two days later you're over it and your stomach's OK." Burton also used a quote from his late brother, Phil, on how he believe the situation should be handled: "The only way to deal with exploiters is to terrorize the bastards." Asked how long the committee process would take re: the MOU, Burton said the MOU sets August 15 as a deadline but that if there is ongoing progress there are allowances that would let the process go as long as into December. LAWSUIT PRESS CONFERENCE Shortly after the lunch, Burton held a press conference to announce a lawsuit against FERC was filed today in the U.S. Court of Appeals for the Ninth Circuit. A copy of the brief and press release was faxed earlier this afternoon to Jim Steffes and should be available in his office. If additional copies are needed, please contact me or Scott Govenar. The plaintiffs are Burton, individually and on behalf of the Senate; Bob Hertzberg, individually and on behalf of the Assembly; and the City of Oakland. At the event were Burton, Hertzberg, Oakland Mayor Jerry Brown, atty. Joe Cotchett of Cotchett, Pitre & Simon (in Burlingame); atty. Clark Kelso, a constitutional scholar from McGeorge School of Law; Sen. Liz Figueroa; and Joan Breuner, vice mayor of Oakland. The suit asks for FERC to respond within 7 days and a ruling within 21 days. Burton opened by explaining that they were suing FERC for not fulfilling its statutory authority to maintain fair and justifiable rates. Hertzberg added that FERC had ignored the law and that they were compelled to file suit for Californians' relief. Joe Cotchett said the suit is "very basic" and is based on the Federal Power Act, which he says limits power costs to "fair and justifiable" rates. A primary strategy in this suit is to present it as a "health and welfare" and public safety suit; he noted that there are 3 million disabled children and 12,000 convalescent homes in CA who can be adversely affected by blackouts. He said it is "not an economic lawsuit -- it's about senior citizens, disabled kids and convalescent facilities." Today also happened to be the legislative day for the California Association of Health Facilities (the nursing home trade assn.), and several nursing home workers were apparently asked to sit at the back of the room for effect. Cotchett said FERC has been told for 3 years that there were opportunities to exert market power. He also claimed that a Redondo Beach facility (obviously AES) was fined $8 million by FERC for taking its plant off-line and substituting higher rates. He said, however, that this order had been sealed. He cited an industry report that predicts 260 hours of blackouts this summer, which could mean four hours a day. That could be, he said, "potentially the ruination of a lot of medicine in refrigeration." Cotchett noted that only hospitals with more than 100 beds are exempt from blackouts, which does not protect surgical centers or many health facilities. Jerry Brown added that "prices are unjust and people are suffering." Continued high prices could mean "potential civic disruption," and that there will be "more actions to mobilize" Western mayors. Liz Figueroa spoke briefly to reiterate the health aspects of the lawsuit. Burton had mentioned Clark Kelso, who regularly appears on TV here as a legal expert and I believe was a colleague of Justice Anthony Kennedy, in his Press Club appearance. He said Kelso had appeared regularly in the media early on to say that the state had no standing to file the suit. Burton's lawyer's sent him the brief, and Kelso thought enough of it to join the legal team. Kelso reiterated that FERC has been aware of potential market power for three years, and that the commission has delayed action unreasonably. It has failed to define "fair and justifiable"; that failure, he said, violates the Equal Protection and Due Process clauses of the Constitution. Kelso said this is not a partisan issue, and called upon "fellow Republicans" to support the effort. Joan Breuner (sp?), Oakland's vice mayor, said only that she believed that if the energy situation were happening in Texas rather than California, the president and FERC would have acted long ago. During the Q&A session, Cotchett said the urgency filing is necessary because "5 generators supply 90%" of the electricity in CA and all five have rate renewals before FERC. He also said one of the cases that is relevant is Bush v. Gore, in which the Supreme Court found that failure to set standards (regarding elections, obviously, in that case) violates the Equal Protection clause. He also said six states have expressed interest in the case and have requested briefs: Oregon, Nevada, Arizona, Washington, Minnesota and one other he didn't name. None of these states has yet committed to joining the suit.
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