Please respond to Ken Smith 
California State Treasurer Phil Angelides held a press  conference this afternoon to announce that $3.5 billion in interim financing has  been arranged through J.P. Morgan and Lehman Brothers, and that an additional $1  billion in financing is expected to be completed next week from an undisclosed  source.
 
The financing is in conjunction with an executive order issued  yesterday by the governor that allows bond sales for energy purchased by  the Department of Water Resources.  Previously, Gov. Davis and Treasurer  Angelides had sought legislative approval of the bond issuance, but were not  successful.  Further review by state attorneys determined that the governor  could authorize the issuance of bonds by executive order with the difference  that the bonds can only be used for energy purchases going forward and cannot be  used to backfill past general fund expenditures.  
 
A one-page handout summarizing the financing has been  sent to Houston.  The vital statistics are:
The authorized loan amount is $5 billion, with an initial  $3.5 billion committed;
The rate is 4.75%, but will jump to 7% if the bonds are not  issued successfully by October 31, which is the scheduled maturity date of the  loan (Angelides emphasized that this is not the due  date).

The goal of the financing is to stem the flow of funds from  the general fund for power purchases and avert a cash crisis.  The  financing, which also provides working capital for continued state energy  purchases, is secured by revenues from electricity sales and will be repaid  by the bonds.
 
Angelides noted that the financing, which he hopes to have  totally closed by July 1, precludes generators from walking away from contracts  under the clause that requires financing by a certain date.  He said it  satifsies "most" DWR contracts and precludes arguments made by generators  for a "credit premium."
 
Angelides also said that the financing is important because it  "builds momentum" for the huge revenue bond sale and that it "sends a powerful  signal to Wall Street that the bond issue is real."
 
According to his figures, the general fund is currently out  about $5.2 billion net ($6.1 billion in purchases minus $900 million in  revenues) in power purchases through June 12.
 
Steps still must occur before the bonds can be issued, he  said.  The PUC has to adopt rate agreements, adopt a servicing order with  the utilities to collect revenues to repay the bonds, and has to enact rate  increases of about 3 cents/kwh in SDG&E's territory.  Angelides noted  that the lenders have made their financial commitment event though these PUC  actions are still outstanding.
 
The bonds will not be issued until early September.   Angelides said late August is a terrible time because the financial community is  on a pre-Labor Day holiday and that the state would hold off until the more  favorable period following the holiday.
 

 
Earlier in the afternoon, the Foundation for Taxpayer and  Consumer Rights -- Harvey Rosenfield's group -- held a press conference to voice  opposition to the Edison MOU.  They all seem to agree that the MOU is  likely dead, but are afraid of it arising at a later date in some form.  
 
When asked about the business community being asked to  shoulder the costs of utilities' debt, Rosenfield said that a problem has arisen  in that business wants direct access but DWR has already purchased the power  they "don't want."  He believes Edison alone should be responsible for its  debt; it's government's role to go forward, he said, and Edison's job to "clean  up its mess."
 
Rosenfield cautioned that if legislators "make the mistake of  paying one more penny" towards a bailout there will be a referendum on the  bailout and the legislators voting for it.  He said they would be  held personally accountable.
 
(Exactly what he means by this is unclear.  In  California, a "referendum" -- which is the word he used -- is a little-used tool  to overturn legislation that has been passed and signed.  Whether he was  threatening recall attempts is also unclear.)
 
Rosenfield added that depending on how things progress, there  could be an initiative and it could include a public power  component.
 
The press release issued at the press conference, which also  featured Harry Snyder of Consumers Union, has been forwarded to Houston.   It is also available through this link: http://www.consumerwatchdog.org/utilities/pr/pr001706.php3