[LETTERHEAD OF MAGMA POWER COMPANY]
 
                               November 10, 1994
 
Dear Fellow Magma Stockholder:
 
  On behalf of your Board of Directors, we are writing to advise and caution
you about an important recent development.
 
  As you are aware, California Energy Company, Inc. has made an unsolicited
tender offer to purchase approximately 51% of Magma Power's outstanding common
stock for a price of $38.50 per share. The tender offer would be followed by a
merger in which the remaining Magma shares would be purchased with a mix of
approximately $18.10 in cash and shares of California Energy common stock with
a nominal value of approximately $20.40. YOUR BOARD HAS UNANIMOUSLY RECOMMENDED
THAT YOU REJECT CALIFORNIA ENERGY'S OFFER BECAUSE IT IS NOT IN YOUR BEST
INTERESTS.
 
  Magma and its financial advisor, Goldman, Sachs & Co., are currently
exploring all available alternatives to further your best interests, including
conducting discussions with interested third parties. At the same time,
California Energy is soliciting you to call a special meeting of stockholders
to approve a slate of California Energy directors dedicated to serving
California Energy's interests and to pass a series of by-law amendments
designed solely to promote California Energy's interests. California Energy's
call solicitation is simply a pressure tactic through which it hopes to force
your Board and you to make hasty and ill-advised decisions.
 
  YOUR BOARD'S ABILITY TO EXPLORE PRUDENTLY ALL ALTERNATIVES TO FURTHER YOUR
BEST INTERESTS IS ENDANGERED BY CALIFORNIA ENERGY'S SOLICITATION TO CALL A
SPECIAL MEETING.
 
  Your Board is dedicated to serving Magma stockholders. We do not believe it
is in your best interest to vote in favor of a proposal that serves only
California Energy's own agenda. A VOTE IN FAVOR OF CALLING A SPECIAL MEETING IS
A VOTE AGAINST YOUR BEST INTERESTS.
 
  YOU ARE URGED NOT TO SIGN THE GREEN REQUEST CARD SENT TO YOU BY CALIFORNIA
ENERGY.
 
  Be assured that your Board and management will continue to act to further
your best interests. We greatly appreciate your continued support and
encouragement, and will keep you advised of significant future developments.
 
Sincerely,
 
Paul M. Pankratz                        Ralph W. Boeker
Chairman                                President and Chief Executive Officer

 
  The following information is provided pursuant to Section 14(a) of the
Securities Exchange Act of 1934, as amended, and Rule 14a-11(b)(2) thereto. The
participants in the solicitation are Magma Power Company, the following
directors and others, who in the aggregate are deemed to beneficially own
approximately 2.1% of the outstanding common shares of Magma common stock:
James D. Shepard, Paul M. Pankratz, Thomas C. Hinrichs, Ralph W. Boeker, Louis
A. Simpson, John D. Roach, Roger L. Kesseler, Lester L. Coleman, William R.
Knee, Bent Petersen, and J. Pedro Reinhard, and Jon R. Peele, Wallace C.
Dieckmann, Kenneth J. Kerr, and Trond Aschehoug. No participant individually
owns more than 1% of the outstanding shares of Magma's common stock. Messrs.
Kesseler, Knee and Reinhard are employees of The Dow Chemical Company ("Dow").
Dow is the beneficial owner of 5,032,430 shares of Magma's common stock, of
which 4,000,005 shares are held in escrow to satisfy certain exchange rights
under an existing Dow note indenture. Dow retains the right to vote the shares
placed in escrow. In addition, the Company is a party to a technical services
agreement with Dow pursuant to which the Company has made payments for
technical services in the amounts of $575,000 for 1993 and has agreed to make
payments of $550,000 for 1994 and thereafter in annual amounts reduced by
$50,000 each year to $300,000 for 1999. The Company is also a party to an
engineering and construction management services agreement with Dow Engineering
Company. The Company believes that the technical services agreement and the
engineering and construction management services agreement are on terms at
least as favorable to the Company as would be available from an unaffiliated
third party. Mr. Shepard is a co-trustee of the B.C. McCabe Foundation (the
"Foundation"), which beneficially owns 2,752,641 shares of Magma's common
stock. Mr. Shepard disclaims beneficial ownership of such shares.
 
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