[LETTERHEAD OF MAGMA POWER COMPANY]
 
 
                                October 31, 1994
 
Dear Fellow Magma Stockholder:
 
  On October 21, 1994, California Energy Company announced that it had raised
the price offered in its unsolicited tender offer to purchase approximately 51%
of Magma's outstanding common stock to $38.50 per share. The consideration
offered in the back-end merger contemplated by the revised California Energy
offer would now consist of approximately $18.10 in cash and California Energy
common stock with a nominal value of approximately $20.40.
 
  After extensive analysis and for the reasons set forth in the accompanying
Amendment No. 5 to Magma's Schedule 14D-9, including the revised offer's
conditional nature, the terms and conditions of California Energy's financing,
which include execution of a merger agreement and California Energy's financing
source's satisfaction with its due diligence review of both California Energy
and Magma, and the opinion of Magma's financial advisor, Goldman, Sachs & Co.,
that the consideration offered in the revised offer was inadequate, your Board
of Directors has unanimously determined that the revised California Energy
offer is not in the best interests of Magma's stockholders. YOUR BOARD STRONGLY
RECOMMENDS THAT YOU REJECT THE REVISED OFFER AND NOT TENDER YOUR SHARES TO
CALIFORNIA ENERGY.
 
  Your Board has authorized Magma management and its financial advisor to
explore all available alternatives to further the best interests of Magma
stockholders, including remaining independent, conducting discussions with
interested parties, including California Energy, concerning possible business
combinations, strategic partnerships or equity investments, recapitalizing or
restructuring the company and similar transactions.
 
  Your Board is dedicated to serving your interests. Please read carefully the
enclosed Schedule 14D-9 amendment which describes in depth your Board's
recommendation.
 
  We greatly appreciate your continued support and encouragement. We will keep
you advised of significant future developments.
 
Sincerely,
 
/s/ Paul M. Pankratz                      /s/ Ralph W. Boeker

Paul M. Pankratz                         Ralph W. Boeker
Chairman                                 President and C.E.O.