EXHIBIT 99.260
MISSION
o Review various options for the future market place in California and the
west to develop scenario responses for either the PX as an institution,
Project Peace, or other combinations of PX assets, talent and market
position.
o Develop a shut down plan for the PX should orderly transition to new
market prove infeasible
12/9/00 PROJECT TOMORROW CONFIDENTIAL 2
Four Scenarios Considered
o Reintegrate at IOU level self-scheduling of generation and new built
capacity for further security of default load, abandoning current market
structure -- leaves ISO in charge of grid
o Stay the course but allow IOU rates to increase and deny PX special status
past 2 Q 2001
o Integrate PX spot functions into new State managed integrated grid business
(removes ISO)
o Regionalize grid under FERC but integrate IOUs with Muni's in a State
managed reliability, market coalition
12/9/00 PROJECT TOMORROW CONFIDENTIAL 3
o Reintegrate at IOU level self-scheduling of generation and new built
capacity for further security of default load, abandoning current market
structure -- leaves ISO in charge of grid
[CHART] REMAINING PROCUREMENT PROPORTIONS
WILL LIKELY BE 3/4 FORWARDS --
DIRECTLY SCHEDULED TO LOAD AT ISO
SC SERVICE ONLY -- QUESTIONABLE NEED
OF REASONABLENESS REVIEW RISK -- WACOP
12/9/00 PROJECT TOMORROW CONFIDENTIAL 4
Reintegrate at IOU level self-scheduling of generation and new built
capacity for further security of default load, abandoning current market
structure -- leaves ISO in charge of grid
Project Tomorrow -- No Partners
o Must secure SC service commitment from one of two major IOUs or abandon SC
service by 2 Q 2001
o Must attract broker feed to forwards and gain muni deal flow
o Must gain market functions including real time (Alberta auction type) and
ancillary from ISO -- maintain spot auction -- maintain reasonableness
o Reduce extra-regional focus to win WSCC only
o Reduce OPEX and CAPX to less than $40 M total
Project Peace
o Develop WSCC eTransMart with SC commitments from area IOUs, including CA,
and larger munis (probably less than 10 cents a MWH)
o JV with large western broker to run forwards exchange and bilateral
o Pursue clearing with partners
o Explore derivatives market
o Focus on IOU marginal markets in CASC business probably not winnable in
2001 from big two
o Minimize PX reasonableness exclusivity -- continue with exchange based
advantages
12/9/00 PROJECT TOMORROW CONFIDENTIAL 5
o Stay the course but allow IOU rates to increase and deny PX special status
past 2 Q 2001
[CHART] IOUs WILL LIKELY
SEEK PORTFOLIO DIVERSITY
OVER 100% RELIANCE ON
PX. OTHERS WILL COMPETE
WITH UNBUNDLED SERVICES
AND LOWER PER TRANSACTION
FEES. REDUCED ISO
ROLE IS BEST OPPORTUNITY
FOR PROJECT PEACE.
PROJECT TOMORROW
VULNERABLE TO INABILITY
RAISE CAPITAL FOR NEW
SERVICES. NO NEED FOR IOU
TO FUND TOMORROW.
12/9/00 PROJECT TOMORROW CONFIDENTIAL 6
o Integrate PX spot functions into new State managed integrated grid business
(removes ISO)
LOAD ACTIVITIES OUTSIDE INTEGRATED STATE MARKET
[CHART]
STATE MANAGED INTEGRATED GRID MARKET
OPERATOR (PJM LIKE) RUNS IMBALANCE
AND SPOT MATCHING MARKET.
PRICE DISCOVERY BASED ON PAY AS BID
AUCTION OF LMP MODEL USING COST
REFERENCE. OOM STILL NEEDED IN SHORT
TERM.
SUPPLY ACTIVITIES OUTSIDE INTEGRATED STATE MARKET
12/9/00 PROJECT TOMORROW CONFIDENTIAL 7
Integrate PX spot functions into new State managed
integrated grid business (removes ISO)
Project Tomorrow
o Keeps MOPS function
o Combines settlements and finance
o State focus only
o Normal corporate integration
o Drops CTS
Project Peace
o Exits Ca in near term for eTransMart option
o Competes for CTS and forward business
o May allow specialties -- green and muni links
o Service contract unlikely but feasible to operate for State the combined
market features
o PX business base least valuable here
12/9/00 PROJECT TOMORROW CONFIDENTIAL 8
o Regionalize grid under FERC but integrate IOUs with Muni's in a State
managed reliability, market coalition
[CHART]
Regional RTO
Imbalance energy
Reliability
Transmission Mgmt
Transmission market
o Procurement
o Load balancing
o SC services to RTO
o AS self-supply & trades
12/9/00 PROJECT TOMORROW CONFIDENTIAL 9
Regionalize grid under FERC but integrate IOUs with Muni's
in a State managed reliability, market coalition
Project Tomorrow
o Run CA specialty spot market auction
o CTS may still be viable
o Offer SC services to RTO
o Compete with in-house solutions may be very difficult
o Consumer slant and muni culture makes PUC role diminished and PX value
less certain
o Reduced fees a must
Project Peace
o eTransMart is very viable
o SC services to integrated State focus can be competitive -- delink from
old PX may be helpful
o Forward exchange viable
o Specialty spot exchange service between and among various entities
possible also
o Credit for spot not valued
[Notes and Graphics Omitted]
12/9/00 PROJECT TOMORROW CONFIDENTIAL 10
Favorability of scenarios to Tomorrow & Peace
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SCENARIO Tomorrow Peace
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REINTEGRATE AT IOU LEVEL SELF-SCHEDULING Difficult but Favorable
OF GENERATION AND NEW BUILT CAPACITY FOR feasible
FURTHER SECURITY OF DEFAULT LOAD,
ABANDONING CURRENT MARKET STRUCTURE --
LEAVES ISO IN CHARGE OF GRID
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STAY THE COURSE BUT ALLOW IOU RATES TO Cost base Very favorable
INCREASE AND DENY PX SPECIAL STATUS difficult to
PAST 2 Q 2001 sustain -- current
lack of funding
could be fatal
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INTEGRATE PX SPOT FUNCTIONS INTO NEW Loss of identity Least attractive
STATE MANAGED INTEGRATED GRID BUSINESS certain Ca skills
(REMOVES ISO) limited value
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REGIONALIZE GRID UNDER FERC BUT Feasible Feasible &
INTEGRATE IOUs WITH MUNI'S IN A STATE favorable
MANAGED RELIABILITY, MARKET COALITION
12/9/00 PROJECT TOMORROW CONFIDENTIAL 11