----- Forwarded by Elizabeth Sager/HOU/ECT on 12/20/2000 06:12 PM -----

	"JOHN G KLAUBERG" <JKLAUBER@LLGM.COM>
	12/20/2000 04:38 PM
		 
		 To: Elizabeth.Sager@enron.com, shari.stack@enron.com
		 cc: 
		 Subject: Fwd: PGE default warnings issued


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=20
Wednesday December 20, 4:56 pm Eastern Time
Calif. utilities risk imminent default, S&P warns
(UPDATE: Recasts, adds details, background. Adds byline)

By Jonathan Stempel

NEW YORK, Dec 20 (Reuters) - Pacific Gas & Electric Co. and Southern =
California Edison are at grave risk of default and bankruptcy within =
weeks, and are likely to see their high credit ratings fall to low junk =
grades if they do not get regulatory help by Friday, credit rating agency =
Standard & Poor's said on Wednesday.

``S&P is prepared to take dramatic rating action,'' said Richard Cortright,=
 an S&P analyst, in a conference call. ``The ratings are expected to drop =
deeply into speculative grade to reflect the likelihood of imminent =
default.''

The agency assessed the situation as the California Public Utilities =
Commission prepared to meet Thursday to consider whether to allow Pacific =
G&E and Southern California Edison to pass on at least some of their =
skyrocketing wholesale electricity costs to consumers.

Shares of PG&E Corp.(NYSE:PCG - news), the parent of Pacific G&E, closed =
Wednesday on the New York Stock Exchange at $20-15/16, down $1-7/16, or =
6.42 percent. Shares of Edison International (NYSE:EIX - news), the parent =
of Southern California Edison, closed at $17-7/8, down $1-1/8, or 5.92 =
percent.

The utilities operate under a rate freeze through March 2002, and are also =
unable to negotiate long-term supply contracts. These factors expose them =
to the vagaries of the volatile spot power market.

Wholesale power recently cost more than $1,400 per megawatt hour, a more =
than 40-fold increase over the $35 per megawatt hour rate last year.

California imposed the rate freeze as part of its deregulation of the =
utilities sector, which was intended to promote competition and consumer =
choice.

Among the options the commission has to remedy the situation are a hike in =
the utilities' price caps.

Even that, however, would constitute a ``band-aid on a bullet wound,'' =
said Ron Barone, who leads S&P's utility group and also participated in =
the conference call.

Californians have already been warned to cut back their energy use, and =
that they may be subject to rolling blackouts.

Cortright said unless the commission offers the utilities significant =
regulatory relief, Pacific G&E and Southern California Edison will be =
dependent on the capital markets for cash infusions, if any are available.

``There are bills that are coming due in January and February,'' he said. =
``We would be naive to think that the capital markets are going to open =
their doors to satisfy (their needs) in the current environment.''

``To be frank,'' he added, ``we are amazed that events have been permitted =
to reach anywhere near this critical stage. It truly is unfathomable. We =
really do need some emergency actions taken now.''

Pacific G&E last completed a big bond sale in October, selling $1.35 =
billion of bonds. Southern California Edison and its parent, Edison =
International, sold an equivalent amount in early November.

Both companies carry ``A-plus'' corporate credit ratings and ``single-A'' =
senior unsecured debt ratings. Pacific G&E's secured debt carries an =
``AA-minus'' rating. Those ratings are considered mid to high investment =
grades.

One trader said Southern California Edison's debt began on Tuesday being =
quoted by price, like junk bonds, instead of by the extra yield they offer =
relative to similar maturity U.S. Treasuries, like investment-grade bonds.

Its 5.875 percent notes maturing in September 2004 were quoted Wednesday =
at about 87 cents on the dollar, yielding about 11.3 percent to maturity. =
No price quotation was immediately available on Pacific G&E's debt.=20