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	"Ronald Carroll" <rcarroll@bracepatt.com>
	03/08/2001 10:20 AM
		 
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		 Subject: Fwd: Calif. clears state water agency to collect power payments


----- Message from "Tracey Bradley" <tbradley@bracepatt.com> on Thu, 08 Mar 
2001 08:11:46 -0600 -----
To:	"Paul Fox" <pfox@bracepatt.com>
cc:	"Jeffrey Watkiss" <dwatkiss@bracepatt.com>, "Ronald Carroll" 
<rcarroll@bracepatt.com>
Subject:	Calif. clears state water agency to collect power payments
Wednesday March 7, 8:22 pm Eastern Time

Calif. clears state water agency to collect power payments

SAN FRANCISCO, March 7 (Reuters) - California regulators took another step on 
Wednesday to allow the state's Department of Water Resources (DWR) to collect 
payments for power supplies purchased by the state agency.

The California Public Utilities Commission (CPUC), which sets gas and 
electric rates, approved an order for the water agency to recover the 
taxpayers' money it is spending to buy electricity for customers of the 
state's two biggest -- and nearly bankrupt -- utilities.

There currently is no mechanism allowing the DWR to collect money for buying 
power on behalf of the utilities.

The CPUC's approval, however, did not set actual rates for the 24 million 
people served by PG&E Corp.'s (NYSE:PCG - news) Pacific Gas and Electric unit 
(PG&E) and Edison International's (NYSE:EIX - news) Southern California 
Edison subsidiary.

An ``interim'' rate -- called the California Procurement Adjustment -- may be 
proposed by late next week and will require another vote by the regulators.

Under Gov. Gray Davis's plan to stabilize the California power business, the 
water agency has been charged with purchasing electricity to meet the state's 
short and long-term needs.

Davis, however, is trying to avoid politically unpopular rate hikes, instead 
recovering the water agency's cost from a portion of existing utility 
electricity rates.

DWR has been spending up to $50 million a day for short-term energy supplies 
and negotiating long-term contracts with independent power generators.

On Monday, Davis announced 40 deals or preliminary agreements to buy power 
from 20 generators, with delivery scheduled anywhere from four months to 10 
years, and one deal lasting 20 years.

The state government has been thrust into the power business because PG&E and 
SoCal Edison are awash in some $13 billion of red ink and generators will no 
longer do business with them.

The utilities have accumulated the debt since last spring due to terms of 
California's flawed electricity deregulation scheme that forced them to pay 
soaring prices for wholesale power that they could not collect from their 
retail customers because of a rate freeze.

A California consumer group warned after the CPUC action today that once a 
rate is decided, the water agency may be in a position to set higher rates 
for the utilities' customers.

Nettie Hoge, head of The Utility Reform Network (TURN), a consumer advocate 
group, warned the water agency ``could say that it needs more revenue from 
ratepayers for its costs and there would be no reviews by the CPUC to decide 
if the increases were prudent.''