Executive Summary:
? Undercollet Remains Sticking Point for Utility Creditors (especially QFs), 
involuntary bankruptcy likely if issue is not addressed in today's CAPUC 
hearings
? CAPUC Rate Increase Set at 40%, Pending DWR Power Purchase Details
? Davis Defends No Rate Increase Position, Distances Himself from CAPUC

QF/Generator undercollect may be an invitation to involuntary bankruptcy
As reported last week, QF has sitting and waiting to hear what the CAPUC has 
to say, unfortunately it may not be what the QFs want to hear.  The 
utilities' undercollect, which will not be addressed in today's CAPUC 
hearings, could very well provide an invitation for QFs and generators to 
file involuntary bankruptcy against SoCal and PG&E.  Recent rate hikes 
proposed by the CAPUC specifically dictate that any revenue generated from 
rate increases cannot be used to pay off utility past debt, leaving the QF 
with little hope of recovery.  QFs were obviously dismayed by the CAPUC's 
draft order and if the decision is passed as it currently reads, an 
involuntary bankruptcy filing is still likely.

CAPUC holds rate increase hearings today
As reported yesterday, Loretta Lynch released the details of the CAPUC's 
draft rate increase order last night.  There is expected to be a 3 cent/kwh 
surcharge on power bills or roughly a 40% rate increase.  A portion of this 
"surcharge" will be given to the DWR to cover its costs and the order 
concludes that utilities need revenues on a going-forward basis.  Therefore, 
utilities can only use the revenues for power purchases going forward and are 
expressly forbidden from using this cash to pay down past debt (ex. QFs).  
However, the utilities are ordered to resume payments to the QFs on a 
going-forward basis.  The net effect of the order is to allow the utilities 
to operate in case of bankruptcy.

One interesting point in the draft is its decision which calls on the 
utilities to join  with the state in pursuing a refund on the amount 
overcharged for power by the generators.  The suggestion is that the 
utilities take legal action against the generators to recoup funds.  Only the 
funds recovered from generators can be used to pay down the utilities' past 
debt.  If the utilities choose this course of action, it would be a very 
lengthy process.
  
Davis contends with Lynch on CAPUC rate increases.
Davis has thus far refused to support CAPUC's proposed rate increase stating 
the CAPUC decision making board is an independent body and that he continues 
to believe that a resolution can be found within the current rate structure.  
Sources indicate that he is likely to ask for Lynch's letter of resignation, 
however, there is no indication she will comply.  Senator Burton, who 
supports the CAPUC's plan, reportedly will protect Lynch by not allowing her 
to be impeached (which is the only other way she could be removed by the 
governor).