Please add David Leboe to your distribution list.

Thanks.


From: Jeff Dasovich on 04/09/2001 10:36 AM
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Subject: Summary of Weekend events:
Governor, Utility In War Of Words--Davis furious as PG&E defends bankruptcy 
filing 

This pretty much summarizes the events over the weekend resulting from PG&E's 
filing on Monday--more stellar leadership from the administration.
Biggest news is that the Governor is now frantically trying to cobble 
together a Tx buy-out deal with Edison & Sempra; but note that Burton in this 
story questions whether it makes sense to buy Tx if PG&E isn't part of the 
deal.
The first hearing on the bankruptcy is today.

Governor, Utility In War Of Words 
Davis furious as PG&E defends bankruptcy filing 
David Lazarus, Chronicle Staff Writer
Monday, April 9, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/09/M
N223519.DTL 
California's energy mess took an ugly turn yesterday as Gov. Gray Davis and 
Pacific Gas and Electric Co. traded barbs over who is to blame for the 
bankruptcy of the state's largest utility. 
In a series of tit-for-tat statements, each side laid claim to the moral high 
ground while insisting that the other had been dealing in bad faith. 
The governor spent part of his time yesterday giving television interviews in 
response to The Chronicle's report Saturday that PG&E awarded $50 million in 
bonuses and raises to 6,000 employees just hours before Friday's bankruptcy 
filing. 
"PG&E's management is suffering from two afflictions: denial and greed," 
Davis said in a brief statement Saturday night. 
In a testy reply, PG&E countered that "instead of focusing all his attention 
on solving the state's yearlong and ever-worsening energy crisis, the 
governor has launched a campaign-style attack on our company." 
PG&E said Davis was criticizing "thousands of men and women who have worked 
tirelessly and professionally through this crisis" and concluded that 
"California would be far better served if the governor turned his attention 
to the crisis at hand." 
Steve Maviglio, a spokesman for the governor, fired back yesterday: "PG&E 
waged a public relations war on Friday. If they're looking for somebody to 
blame, they should look in the mirror." 
Maviglio also said the governor was concentrating on reaching a final accord 
with Southern California Edison Co. for the state to purchase the cash- 
strapped company's power lines for nearly $2.8 billion. 
A last round of talks was scheduled to be held last night. 
"There are a few remaining details to be worked out, but it seems pretty 
close," Maviglio said, adding that an announcement of the deal could come as 
early as today. 
"The governor is spending his time negotiating with a responsible utility," 
he said. 
Along with the Edison deal, Davis spent the weekend huddling with energy 
advisers and lawyers trying to come up with an appropriate response to PG&E's 
bankruptcy bombshell. 
Efforts to stabilize California's dysfunctional electricity market suddenly 
have become much more complex. 
NOT MUCH CHANGED
Nevertheless, while PG&E's bankruptcy is by far the most sensational aspect 
of California's long-drawn-out energy mess, at the end of the day, it doesn't 
really change a thing. 
Consider: 
-- PG&E's financial woes stem from a rate freeze that prevented the utility 
from passing along to customers runaway wholesale power costs. That rate 
freeze and sky-high electricity prices remain in place. 
-- California's energy shortage is primarily the result of the state not 
having built any major power plants for the past 12 years. PG&E's bankruptcy 
does nothing to affect that precarious situation. 
-- PG&E's foray into bankruptcy court does not alter the fact that 
electricity demand is outpacing available supply. California consumers still 
face a threat of daily blackouts when power usage spikes this summer. 
"The crux of the problem is still the same," said Loretta Lynch, president of 
the state Public Utilities Commission. "We face the same challenges we did 
before PG&E filed for bankruptcy." 
She added, however, that PG&E's bankruptcy "increases the uncertainty." 
The utility doesn't see it that way. 
PG&E spokesman Ron Low said California's energy woes are no more uncertain 
now than they were when the company ostensibly was negotiating with Davis to 
find an equitable solution to the state's troubles. 
"California remains in an energy crisis," he said. "As we head toward summer, 
resources are going to be very tight." 
WHAT COULD HAPPEN
In the short run, consumers will notice no change whatsoever. Bankruptcy 
protection will allow PG&E to continue operating as usual while the company's 
creditors line up to receive at least partial payment of outstanding bills. 
Longer term, there is a very real possibility that electricity rates will 
soar if the bankruptcy judge agrees with PG&E that conditions for lifting the 
rate freeze were met a year ago and that $9 billion in subsequent expenses 
must be borne by consumers. 
How much people's bills would rise depends on how the rate increase is 
structured. It would probably come in the form of a surcharge on existing 
fees, 
but the monthly hit to consumers could be limited by spreading the total cost 
over a number of years. 
The big question mark now is how PG&E's bankruptcy will affect various 
political and legislative measures intended to keep California's lights on. 
The state's attempt to purchase PG&E's power lines is obviously finished, 
although a new deal could be negotiated in bankruptcy court. 
Meanwhile, the governor is pressing ahead with plans to purchase the 
transmission systems of Edison and Sempra Energy's San Diego utility -- 
although what the state would do with only a partial power grid has yet to be 
determined. 
"Does it make any sense to have the transmission lines of Edison and Sempra 
and not PG&E?" asked state Senate President Pro Tem John Burton, D-San 
Francisco. "I don't know the answer to that." 
A final accord with Edison this week would validate PG&E's apparent concerns 
that it would have had a harder time limiting backlash to its bankruptcy 
filing if the utility had acted after a breakthrough with Edison was 
unveiled. 
The Chronicle quoted PG&E insiders yesterday as saying that the decision to 
file for bankruptcy had been made early last week, even though senior company 
officials said the move followed the governor's Thursday night speech on 
solving California's energy issues. 
One reason PG&E opted to file on Friday morning was because a final deal with 
Edison was expected at any time, observers said. 
Paul Patterson, an analyst at Credit Suisse First Boston, noted that if PG&E 
had filed for bankruptcy after Edison came to terms with the state, "they 
would be seen as a spoiler." 
ENSUING CONFUSION
In any case, PG&E's surprise filing has left all concerned scrambling for 
footing in the changed political landscape. 
Consumer advocates watched with dismay yesterday as the state's political and 
corporate powers slugged it out for supremacy. 
Nettie Hoge, executive director of The Utility Reform Network in San 
Francisco, said all this finger-pointing will do nothing to ensure that 
Californians have ample supplies of electricity this summer. 
"These guys should grow up and come up with a situation that works for the 
public," she said. 
E-mail David Lazarus at dlazarus@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 1