Status Report

Here is the status of projects that I am aware of:
Enquiry into Removal Strategy for Berg Defendants
I spoke with Rich Levy of Gibson Dunn & Crutcher who represents
SEMPRA in the Berg gas/electric class action filed in Los Angeles. [(213)
229-7556 rlevy@gdclaw.com] I asked him whether he would tell me if they
were considering removal of the Berg action. He told me that he had our
removal papers. He asked if we had any research that we were willing to
share with him. He said they looked at preemption, filed rate doctrine,
ripeness etc. and concluded that ultimately we would be in state court. He
also said that he did not believe there were any good motions to dismiss
that were worth making. I told him that some of the work product was a
joint defense effort that would require permission to share (e.g. the Paul
Hastings memo) but that there was other work product we might be willing to
share that had been done on behalf of Enron. I told him that I believed
that there was good ninth circuit authority that was helpful and we really
believed federal court was a better forum for these types of cases. He told
me he was willing to look at whatever authorities we could give him. I
also told him that I understood that Mike Weaver represented Sempra in the
San Diego cases and gave him Mike's contact information. He asked for
copies of our complaints and I sent them on to him. He is willing to
discuss the case and possibly strategic alternatives. He told me that El
Paso had retained David Palmer, formerly of Gibson Dunn to represent them in
this action. El Paso and David Palmer are supposedly meeting on Wednesday
January 3rd. According to Rich, their time to remove expires on January
16th.

He told me that the Berg case was originally filed in Texas by the
Denver law firm Astrella & Rice against El Paso. That case was dismissed
because the plaintiff was not a direct purchaser. The plaintiffs then
sought to have Southern California Edison agree to be the named plaintiff.
Apparently they refused. Rich said they were meeting with SCE to find out
what else was said.

There is a second gas complaint, the Continental Forge case.
Apparently this case was filed in September but never served. It has now
been amended and has been served. A copy is attached. (We obtained this
copy from the plaintiff's website so it does not have a signature for file
stamp, but Rich Levy said it was the complaint that had been served.)
<<Continental Forge.cmplt.pdf<<
PUC Hearings
I do not have many of the details of the hearings other than a
report from Mike Day that Michael Aguirre, plaintiffs' counsel in our case,
argued before the PUC that the real culprits are the power marketers and the
solution to the utilities problem is for the utilities to join the
plaintiffs' class action in San Diego. Apparently today, Aguirre was cross
examining the utility and generator witnesses before the PUC (attempting to
aid counsel for the ratepayers) trying to show that the utilities should sue
the power marketers.
Public Record Act Request
Michael Aguirre has made a public record act request for all
information subpoenaed by the PUC and "any other documents related to
alleged wrongdoing" from the ISO. The PUC has set January 3rd as the
response date for comments on the request.
Data Provided by ISO to the PUC
The ISO has told market participants that they have provided day
ahead and hour ahead schedules to the PUC, Bids, actual metered operations,
RMR, OOM, and OOS calls, generation out of service information and import
and export schedules.
EPMI Data
Jeff Richter reported today that he believes they now understand
some of the data problems with the EPMI data. I am scheduled to be in
Portland with Jeff on Friday to resolve the data issues, and discuss
integration of ongoing data collection with pending and potential discovery
requests.
Cornerstone Teleconference
Dave Noonan reports that Michael Keeley at Cornerstone is very
interested in being retained. One of his partners has been contacted by
another defendant but has not yet been retained by them yet. Dave suggested
that we try and do a telephone interview of Michael tomorrow and retain him
if we like what we hear. His CV is set forth below. I will try to
coordinate a time tomorrow morning.
AG Investigation
So far the California AG has been reducing the scope of its data
retention request. For EES, they basically wanted a snapshot and nothing
else for the time being. As for individual computers, they want an
organizational chart to select 6-12 computers that they are interested in.
EPMI Tapes Prepared in Anticipation of Litigation
We are awaiting specific model information about the Nicelog taping
system used in Portland. Dan Dietrich in IT in Houston is getting that
information for us. We believe we will have access to some technology that
will assist in the review of these materials. We will also distribute
shortly the results of our research on the production of such materials and
any exact transcripts prepared of those litigation materials.
Current Trading Practices
Christian Yoder, Steve Hall, Marcus Woods, Alan Comnes, Dan Watkiss,
Richard Sanders and myself discussed current trading practices in the out of
market and over $150 cap scenarios. In short, if the ISO calls for power 20
minutes before the hour it is needed, there is no cap. In some instances,
EPMI will have purchased power for $x and offer to sell it to the ISO at
$x+. The plus factor being the credit risk and/or the refund risk for
having sold that power in addition to prevailing market conditions. In the
over $150 cap situation, EPMI will be collecting its cost data to compare
with the prices charged the ISO or PX. EPMI will be matching its ISO and PX
sales data with comparable high cost energy in its portfolio. This is
consistent with FERC pre-existing practice. We also discussed standard
instructions to traders.
Price Gouging Statute
Richard Sanders has asked that we revisit the California Price
Gouging Statute in view of the current trading practices. California Penal
Code section 396 prohibits price increases upon the proclamation of a state
of emergency by the President, Governor, or executive officer of any county
or city resulting from a natural or manmade disaster. For thirty days after
such a proclamation, it is unlawful for any business "to sell or offer to
sell any consumer . . . goods, goods or services used for emergency cleanup,
. . . for a price of more than 10 percent above the price charged by that
person for those goods or services immediately prior to the proclamation of
emergency." Such a violation is a misdemeanor punishable by one year of
jail time and a fine of up to $10,000. A violation also constitutes an
unlawful business practice under section 17200. It is unclear whether this
statute includes the sale of electricity and/ or the declaration of a state
of emergency by the ISO.
Ed Kee Engagement Letter
Mike Kirby forwarded the form of engagement letter from Ed Kee.
Charles River Engagement Letter
I have been in discussions with Charles River over the form of the
engagement letter. I hope to have that resolved shortly.

Thanks
Gary

Michael Keeley Senior Vice President Menlo Park Office 1000 El Camino Real
Menlo Park, CA 94025 650.853.1660 mkeeley@cornerstone.com
<mailto:mkeeley@cornerstone.com<
Michael Keeley heads the firm's antitrust practice and helped develop its
intellectual property practice. He is an expert in economics, econometrics
and finance. For more than twenty years, Dr. Keeley has consulted on and
served as an expert in a variety of business issues and legal disputes. He
has testified in Federal Court in several prominent cases, including the
Long Beach crude oil price-fixing case (MDL 150) and the Mercedes-Benz tying
cases. He has also consulted on, managed or served as an expert in a number
of other leading cases, including the Bell Atlantic v. AT&T antitrust
matter, the Aguilar, et al. v. Atlantic Richfield Corporation, et al.
antitrust case, Hartford House, Ltd., d.b.a. Blue Mountain Arts v. Microsoft
Corporation unfair competition case, the Lotus v. Borland and Sony v.
Connectix copyright cases, the MCI v. AT&T patent matter, the AMD v. Intel
arbitration, the Wyoming Tight Sands Antitrust Litigation and the
Exxon-Mobil merger. He has worked on numerous antitrust and intellectual
property cases, as well as on other cases dealing with issues such as
securities fraud, breach of contract, transfer pricing, fraudulent
conveyance and piercing the corporate veil. Dr. Keeley has also consulted on
non-litigation business and economic issues, such as antitrust policy, the
optimal design of regulatory programs, the reform of the welfare system,
auction design and bidding strategy, and economic development. In the
antitrust area, much of Dr. Keeley's consulting has focused on cases
involving allegations of price fixing, monopolization, predatory pricing,
tying, unfair competition and price discrimination. He has addressed issues
of class certification, assessed the validity of damage studies, analyzed
the competitive effects of disputed practices and gauged the potential
economic effects of proposed mergers and acquisitions. Also, he authored
declarations in support of summary judgment in two antitrust matters in
which the courts granted summary judgment. In the intellectual property
area, Dr. Keeley's consulting has focused on the proper measurement of
damages in patent, copyright and trade dress infringement matters,
assessment of damages in matters involving alleged breaches of technology
sharing agreements and analyzing liability and damage issues arising in
antitrust counterclaims. In the patent area, he has testified in a number of
cases, including AlliedSignal v. Sextant Avionique, Surety Technologies and
Telcordia Technologies v. Entrust Technologies, Harris Corporation v.
Macronix International, Level One Communications v. SEEQ Technology,
Scripto-Tokai v. Gillette and Agtek v. Spectra Physics. He has addressed
issues of lost profits and reasonable royalties as well as the valuation of
intellectual property in general. He has negotiated a software license and
is a member of the Licensing Executives Society. He authored "Estimating
Patent Damages in Patent Infringement Cases: An Economic Perspective" and
"Infringement: Valuing IP for Damages," which appeared in Les Nouvelles, a
publication of the Licensing Executives Society. In the oil and gas area,
Dr. Keeley has served as an expert focusing on liability and damage issues
in a variety of matters involving antitrust and breach of contract. In the
Long Beach (MDL 150) case, he addressed the plaintiffs' allegations that
defendants fixed the price of crude oil and assessed the validity of their
damage claims. Dr. Keeley also addressed liability issues in the Aguilar, et
al. v. Atlantic Richfield Corporation, et al. case, a class action in which
the plaintiffs alleged that the defendants had fixed gasoline prices in
California. In addition to serving as an expert in oil and gas cases, Dr.
Keeley has served as a consultant in several matters, including the Wyoming
Tight Sands Antitrust Litigation, the McMahon case, a nationwide
class-action antitrust matter alleging the price fixing of crude oil and the
Exxon-Mobil merger. In addition to oil and gas, Dr. Keeley has gained
familiarity with a number of other industries, including the computer
hardware and software, telecommunications, automotive and financial services
industries. Prior to joining Cornerstone Research in 1989, he was an
officer of the Federal Reserve Bank of San Francisco, where his
responsibilities included conducting financial and economic research in
support of the Federal Reserve's regulatory activities. He also analyzed the
antitrust implications of bank mergers and acquisitions and made
recommendations to the Board of Governors of the Federal Reserve System
regarding whether or not such mergers might have anticompetitive impacts.
Before joining the Federal Reserve Bank of San Francisco, he founded and
managed Stanford Research Institute's (SRI's) Antitrust Economic Consulting
Group. In addition to consulting on a variety of antitrust matters, his work
at SRI focused on policy-oriented economic and statistical research. Dr.
Keeley has also taught courses in managerial economics and microeconomics in
the Graduate School of Business and the Department of Economics at the
University of Santa Clara. Dr. Keeley's research has been published widely
in economics and finance journals. He is the author of two books and over
fifty published articles. Based on citations of his research, he was
selected for inclusion in Who's Who in Economics. He was also awarded the
Garn prize for his research on bank risk taking. He has also served as a
referee (i.e., reviewer) for many of the major economics and finance
journals. Education Ph.D., M.A. in economics, University of Chicago; S.B.
in mathematics, Massachusetts Institute of Technology

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- Continental Forge.cmplt.pdf