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Subject: PG&E Plan Of Reorganization
Date: Tue, 25 Sep 2001 08:02:28 -0500
Message-ID: <C4D8F88AD9AE8D4A905C26649E98DC5D06FA97@NAHOU-MSMBX01V.corp.enron.com>
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Thread-Topic: PG&E Plan Of Reorganization
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From: "Tribolet, Michael" <Michael.Tribolet@ENRON.com>
To: "Lavorato, John" <John.J.Lavorato@ENRON.com>,
	"Kitchen, Louise" <Louise.Kitchen@ENRON.com>,
	"Delainey, David" <David.W.Delainey@ENRON.com>,
	"Dietrich, Janet" <Janet.Dietrich@ENRON.com>,
	"Leff, Dan" <Dan.Leff@ENRON.com>,
	"Gahn, Scott" <Scott.Gahn@ENRON.com>,
	"Lipshutz, Cheryl" <Cheryl.Lipshutz@ENRON.com>,
	"Blachman, Jeremy" <Jeremy.Blachman@ENRON.com>
Return-Path: Michael.Tribolet@ENRON.com

All:

Attached is a CSFB synopsis of PG&E's Plan Of Reorganization (POR).    The key to successful Consummation of the POR is being able to move PG&E's retained generating assets (primarily Diablo Canyon Nuclear and the hydro) from CPUC jurisdiction to FERC jurisdiction, under a disaggregation of the assets (Genco, Disco, ElecTransco & GasTransco).   The current cost of service generation rate at CPUC for these assets is approximately 2.8 cents per kwh.   The POR envisions a PPA between Genco and Disco at approximately 4.5 cents per kwh.  The FERC would use a concept of benchmarking in approving this rate.   Benchmarking is a market rate comparison. 

While the POR contemplates no rate increase from the existing average generation rate of 9.4 cents per kwh, with the now lower CDWR revenue requirement, the CPUC could possibly reduce rates in the interim.   This could give the CPUC cover in alleging that the POR is a rate increase.   The critical legal point in the POR is preemption in the Bankruptcy court.  Under this doctrine, Federal law can preempt State law, as part of the POR.   Judge Montali will have to approve this move.   While PG&E envisions POR Consummation by 12/31/02, given the precedent setting nature of this move and what will surely be an adverse CPUC attitude, the process could drag on longer as it is fully adjudicated through the appeals process.

On our claims, the POR at Consumation would pay 60 cents cash and 40 cents in reconstituted notes designed to trade at par.  Interest would be paid from POR Confirmation to Consummation.  Our $403 million in PX credits claims are listed as contested.   The challenges listed are based on: 1) the rate freeze having ended and 2) the effect of FERC price mitigation on the PX clearing price.


Regards,


Michael