CONTACTS 
0201 - PG&E Proj Mngmnt Transm Sys        415 973 6778 fax 8426
020101 - Mr. Bill DeHart, PMP
020102 - Project Manager, Room 1183B-V11C =415 973 5655 pger 510 810 3026
020103 - Project Management Group
0202 - PG&E Transm Contracts              415 973 3872 fax 972 0871
020201 - Ms. Pam Taheri,
020202 - Contract Manager, Rm 2334 Mail Code B23A =415 973 1660
020203 - Transmission Contracts =415 972 0871 (fax)
0203 - PG&E Law Department                415 973 nnnn fax or 800...
020301 - Mr. Glenn West Jr., Esq.;  =415 973 2776
0204 - PG&E Building & Land Svcs.         415 973 8273 fax or 800...
020401 - Mr. Buck Jones;  =415 973 5074; Land Department
0205 - PG&E Trans Sys Engineering         415 973 3877 fax 9209
020501 - Mr. Randy Hopkins, E.E.
020502 - Engineer; Rm 580, Mail Code F5C =415 973 6757
0206 - The Welch Company                  415 781 5700
020601 - Mr. Rod Welch

SUBJECTS
Gold Hill Horseshoe Transmission Upgrad
Contract, SMUD
SMUD Removes Idle Existing Line
Conceptual Framework Agreement, Complete
Investigate R/W Conflicts
Cost Estimate

1208 -    ..
1209 - Summary/Objective
1210 -
121001 - Follow up ref SDS 4 0000.
121002 -
121003 - Bill received E-Mail from Buck Jones citing possible conflict with
121004 - SMUD on contract terms.  Met with contract team to develop strategies.
121005 - Will meet tomorrow to prepare for contract negotiation meeting with
121006 - SMUD on Friday, 941110 in Sacramento.
121007 -
121008 - Submitted ref DIT 1 0001 to Mike with copy to attendees.
121009 -
121010 -
1211 -
1212 -
1213 - Received EM from Buck Jones
1214 -
121401 - Buck reports on investigation of Right of Way conflict, reported at
121402 - ref SDS 3 line 347, Action Item 7 at ref SDS 3 line 92.  His EM today
121403 - seems to indicate this matter is resolved, ref DRT 1 line 15.
121404 -
121405 -
121406 - Buck also reports that SMUD's Wayne Hancock told him that 3 spans of
121407 - an existing double circuit wood pole line between PG&E/SMUD circuits,
121408 - and just south of UARP Jct, must remain.  Wayne said the westerly
121409 - circuit is the 115 line and the easterly circuit is the idle circuit
121410 - (on wood poles from Lake/Gold Hill), and so the double circuit
121411 - segment is NOT TO BE REMOVED, ref DRT 1 line 21.
121412 -
121413 -    This appears to conflict with para 6 of conceptual agreement, ref
121414 -    OF 1 line 52, which does not state SMUD will not remove the 3
121415 -    spans south of the UARP, as reported by Wayne Hancock today.
121416 -
121417 -
121418 - Options & Solutions
121419 -
121420 -   1.  Use 2nd Circuit
121421 -
121422 -       Buck asked if SMUD would consider using the "proposed second
121423 -       circuit position", on the new line, which would allow for the
121424 -       removal of the 3 pole spans? ref DRT 1 line 25.
121425 -
121426 -       Wayne said he didn't think that would work.
121427 -
121428 -           SMUD wants to Keep Existing Scheme
121429 -
121430 -           That would require them to find another location for the
121431 -           energized circuit in the future once they exercised their
121432 -           right to attach their " second" circuit to the new TSP
121433 -           line. ie they want to remain energized and not lose the use
121434 -           of the existing scheme, ref DRT 1 line 30.
121435 -
121436 -
121437 -   2.  PG&E Build Over Top Existing Line
121438 -
121439 -       Wayne felt that SMUD's position all along was that PG&E would
121440 -       build over the top of the 3 pole spans, ref DRT 1 line 31.
121441 -
121442 -
121443 -   3.  Triple Circuit Segment
121444 -
121445 -       Buck suggested a triple circuit segment for that section,
121446 -       allowing for the removal of the wood pole section, ref DRT 1
121447 -       line 34.
121448 -
121449 -           Wayne wasn't sure if this would be acceptable to SMUD
121450 -           without a design, he couldn't say whether clearances could
121451 -           be maintained allowing for their circuit to remain
121452 -           energized, ref DRT 1 line 35.
121453 -
121454 -
121455 -
121456 -
1215 -
1216 -
1217 - 0230 meeting with Contract Negotiating Team
1218 -
121801 - Met in Pam's office with Bill, Glen and Buck.  Randy joined the
121802 - discussion after Buck left.
121803 -
121804 - Buck showed the section of the line at issue, as drawn on a plan
121805 - layout of the existing and proposed new corridor.  He explained the
121806 - routing and other design matters arising from his discussion with
121807 - Wayne Hancock.
121808 -
121809 - Pam said SMUD has also proposed joint ownership of the transmission
121810 - line.  She said SMUD was advised PG&E would not agree to such terms.
121811 - Glen explained SMUD's proposal would be untenable to PG&E because
121812 - certain liability issues.
121813 -
121814 -     His position will be developed further at meeting tomorrow.
121815 -
121816 - Buck suggested SMUD could be permitted to purchase an interest in the
121817 - ownership.  This is complicated by the fact that SMUD has a right-of-
121818 - way, and evidently PG&E has an adjacent right-of-way.  PG&E needs
121819 - access to a portion of SMUD's right of way which has a line that is
121820 - not in use.  Buck feels it is unlikely that SMUD will have a need for
121821 - this line in the future.
121822 -
121823 -     [SMUD changed its position on this point in the negotiations at
121824 -     ref SDS 7 line 169.]
121825 -
121826 - Buck and Pam noted that Wayne Hancock's position conflicts with prior
121827 - understandings from negotiations.  They also reported that some
121828 - dissension, as well as miscommunication, exists within SMUD apart from
121829 - this project that exceeds typical turf control endemic to large
121830 - organizations.
121831 -
121832 - There was discussion that since Wayne Hancock's representations with
121833 - respect to SMUD's intent conflicts with official statements and the
121834 - written record, that it could be a manifestation of turf protection
121835 - and or "payback."  Or, it could reflect genuine miscommunication, such
121836 - that SMUD's negotiators are truely unaware of SMUD's operations.
121837 -
121838 -
121839 -  ..
121840 - Conceptual Framework for Contract Proposal
121841 -
121842 - In any case, PG&E should not presume to solve imagined or possible
121843 - SMUD problems, but should continue to assume that SMUD's official
121844 - position as set out in its proposed conceptual contract language is
121845 - unchanged, until and unless SMUD officially changes it.  PG&E should
121846 - propose revised language for para 6 to force this point and to protect
121847 - against a costly interpretation after entering the agreement.
121848 -
121849 -     Contract Language Change
121850 -
121851 -     Currently the language of para 6 mentions only an:
121852 -
121853 -         "...existing idle wood pole line within the corridor."
121854 -
121855 -     Since the portion of the line covering 3 spans south of UARP
121856 -     junction, is not "idle", this term should simply be omitted, and
121857 -     perhaps a broader description applied, such as:
121858 -
121859 -         "...existing SMUD facilities within the corridor."
121860 -
121861 -
121862 -      ..
121863 -     Cost
121864 -     ----
121865 -     Randy feels PG&E can add a third conductor to the 3 spans at issue
121866 -     for approximately $50 - $75K.
121867 -
121868 -         SMUD would be responsible to make the tie into the line and
121869 -         for any removal of its line system effected by this change
121870 -         from its existing condition.
121871 -
121872 -
121873 - Another solution would be to simply install poles capable of adding
121874 - a 3rd conductor at a future time, and in the meantime, SMUD would
121875 - use the 2nd conductor already included in the project design to
121876 - handle the 3 spans at issue.  Buck feels it is unlikely SMUD will
121877 - ever need the 3rd conductor.  Randy indicated this cost would be
121878 - approximately $30 - $40K.
121879 -
121880 - If SMUD advances a need for this solution, PG&E will offer it at
121881 - SMUD's expense, since SMUD withheld this requirement from PG&E and
121882 - thereby prevented PG&E from recovering from Sierra.  Based on overall
121883 - progress of negotiations, PG&E may be willing to reconsider this
121884 - aspect of its position.
121885 -
121886 -
121887 - Current Costs - $150K
121888 -
121889 - Bill explained PG&E expenses incurred todate.  These exeed amounts
121890 - specifically discussed with Sierra evidently by about $30K or so.
121891 - Sierra will be advised of this situation.  Pam is concerned that PG&E
121892 - hold down project expenses until more progress is made with contract
121893 - negotiations.  She feels the meeting on Thursday with SMUD is
121894 - important on this point.  Bill advised that a little additional time
121895 - in the near term will be charged to the project in order for Mike to
121896 - take over as Project Manager.  Bill explained the role of Rod Welch
121897 - in supporting this effort.
121898 -
121899 -
121900 - SMUD's Delays Costly
121901 -
121902 - Bill pointed out that the continued delays by SMUD are costing PG&E
121903 - for management time.  Pam will give consideration to raising this as
121904 - a prospective reimbursable from SMUD for failing to make adequate
121905 - progress in the negotiations.  She cited lack of preparation and
121906 - continuing to raise new issues.
121907 -
121908 - Another concern is that delay in finalizing the SMUD contract is pre-
121909 - venting PG&E from meeting its schedule to complete the relocation work
121910 - by 951231 in order to qualify for GO 131-D exemption, discussed at the
121911 - Progress Meeting on 941102, per ref SDS 3 line 194, and at ref SDS 3
121912 - line 252.  See also Pam's EM 941104, ref DRP 2 line 24 received at
121913 - ref SDS 5 line 58.
121914 -
121915 -
121916 - Negotiating Leverage
121917 -
121918 - Pam feels SMUD is either not negotiating in good faith or is simply
121919 - lacks diligence because they have no financial stake in the project,
121920 - and this is hampering her work to close this deal, which in turn is
121921 - increasing PG&E costs.
121922 -
121923 - Buck Jones raised several points of leverage to encourage SMUD to
121924 - bring this matter to closure.
121925 -
121926 -     1.  PG&E can declare SMUD's right-of-way inoperable, since they
121927 -         will have no need for it, and then initiate condemnation to
121928 -         take it over, or some similar action with such effect.
121929 -
121930 -     2.  Make a press release that SMUD is holding up relocation of a
121931 -         transmission line in a residential area, which SMUD has
121932 -         previously committed to do.
121933 -
121934 -             There is a slight conflict in this position and a letter
121935 -             issued today by Ed Bedwell, stating that SMUD is "paying
121936 -             its part."
121937 -         ..
121938 -     3.  Superbundling is a possible option.
121939 -
121940 -         [Revised at ref SDS 6 7966]
121941 -
121942 -     4.  Advise SMUD that delays attributable to inadequate
121943 -         preparation and in raising previously undisclosed matters
121944 -         will be submitted to SMUD for payment of PG&E's expenses.
121945 -
121946 -
121947 -
121948 - Negotiating Meeting 941110
121949 -
121950 - Pam and the PG&E team is scheduled to meet with SMUD on Thursday in
121951 - Sacramento at 1430.  She intends to present specific solutions and to
121952 - resolve language differences at the meeting.  Glen will attend to
121953 - support this effort.  Randy will also attend.  Bill suggested that
121954 - Mike Emery attend in order to become current with the issues and the
121955 - actual deal, if it can be struck.
121956 -
121957 - Pam feels this meeting will indicate whether PG&E will be able to
121958 - proceed, or whether there remain major obstacles including the
121959 - viability of the project.
121960 -
121961 -
121962 - Preparation meeting 941109 0830
121963 -
121964 - Pam wants to meet tomorrow at 0830 in her office to develop specific
121965 - strategies and positions to prepare for the meeting on Thursday. She
121966 - asked Glen, Rod, Randy and Bill to attend.  Bill said he has another
121967 - meeting.  He will advise Mike Emery of the meeting, but noted Mike
121968 - has family matters that may preclude him attending. Randy said he has
121969 - other matters tomorrow that preclude him from attending.
121970 -
121971 -
121972 -
1220 -
1221 -
1222 - 1806 called Mike
1223 -
122301 - Left message of above meeting, and submitted this record by EM.
122302 -
122303 -