FROM THE OFFICE OF PUBLIC AFFAIRS

The Governor of California and the bipartisan leadership of the State legislature met with major generators (including qualifying facilities), marketers, utilities, regulators, and Federal officials, to discuss the electricity situation in California.

Recognizing the importance of the issue, as laid out in the Governor's State of the State speech last evening, the participants agreed on the need for cooperation to maintain stability and avoid bankruptcy of California utilities, and assure the long-term regularity of market conditions.

Crucial elements of a solution include:

• The development of approaches to promote long-term purchases of electricity, possible by the State, from generators at an attractive fixed rate.
• The willingness of generators, qualifying facilities, and marketers to provide on a short-term basis forbearance of amounts owed by Pacific Gas and Electric and Southern California Edison in the context of the framework of a comprehensive long-term solution.
• The need to find satisfactory approaches with respect to the obligation accumulation of the utilities for the purchase of power, consistent with contractual obligations, and which are in the public interest.
• Cooperation to better match supply and demand in the short and long term.
• Review of the existing qualifying facilities payment structures.

The parties acknowledge that the problem must be addressed while taking into account the regional nature of the market.

To advance the process further, working groups will be convened Wednesday to address addition technical details. The principals will reconvene this weekend.