RE: CalPX Participant Creditors Meeting/FERC Proposal

As you may know, prior to the start of the last day of the FERC meetings in
Washington DC on Monday, the CalPX submitted to the setttlement judge an in
camera list of the issues that the Committee has been discussing with the
CalPX. The list did not describe the pending proposals as to how the issues
were to be resolved; it only listed the issues according to the CalPX.

Based upon the list submitted to the settlement judge, I wanted him to know
that the Committee is discussing the issues with the CalPX. I had a meeting
with the judge and his staff, with the CalPX and its FERC counsel present,
to let the judge know that settlement discussions were underway, but I did
not know whether the Committee would ultimately approve the proposals that
were pending at that point (the July 8 proposal that was sent to the
Committee). He asked for a copy of the proposal, which I handed his staff,
and he suggested that I describe the proposal to all the sellers in the room
after the California and IOU representative leave. I told him that I could
not describe the proposal as anything other than a proposal that Powerex
supported and that there were others on the Committee that both supported
and did not support the proposal as it stood at that point. He told me to
make the presentation and to tell the group that it was not a Committee
proposal at that point because there were both Committee members that
supported and did not support the proposal at that time. I did indicate,
however, that I was working hard to develop a consenus on the Committee to
support the proposal.

At the judge's request, I made a presentation to all the sellers that were
in the room after the State and IOU representatives left at about 4 pm. I
did not indicate the names of any Committee members that supported or did
not support the proposal, although I did tell the group that Powerex
supported the proposal. The lawyer for Mirant told the group that Mirant
was not in support of the proposal at that time.

Lynn Miller from the CalPX and her FERC lawyer were in the room, which was a
good thing as it turned out. A number of sellers asked whether there was
some way to avoid sending any money to the CalISO without some assurances
that it will be distributed to the appropriate sellers in that market.
Although the CalPX had previously been reluctant to include in the proposal
any language regarding how the CalISO makes distributions, based on the
discussion in the room, CalPX has agreed to escrow amounts payable to the
CalISO, subject to Committee oversight, to ensure that the CalISO directs
that the funds be distributed to the parties entitled to the funds and does
not just turn them over the CDWR or someone else, like the Governor.

Similarly, based on the discussion in the room, the CalPX has agreed to
modify the proposal to provide that any funds that come in the future can
first be used to "true up" the prior distributions back to the beginning
based on the differences in the amounts previously distributed and the
amounts that would be distributed based on a net receivable approach.

There were a few other changes that seemed to make sense, which I have
incorporated into the revised draft attached hereto. I also attach a
redlined copy to show the changes from the July 8 draft that was circulated
last week. It appears that the Committee now has more time to discuss and
consider the proposal, although the judge's staff indicated to me that the
FERC would like to receive a proposal that is endorsed by the Committee as
soon as possible because the FERC is anxious to resolve the remaining CalPX
issues.

During my presentation to the seller group at FERC on Monday, a number of
sellers asked for a copy of the proposal. I was handed about 100 business
cards asking me to send out copies. At this point, I would prefer to send
out copies only after the Committee has developed a consensus to support the
proposal. Therefore, I am not sending out copies at this time. I ask that
all Committee members also not send out copies at this time.

Thank you all for responding to calls on short notice last week.

If you have any questions, please let me know.

- FERC Proposal Weg rev Jul 11 01.DOC
- FERC Proposal Weg Redline Jul 11 vs Jul 8 01.DOC