FYI.  Per our call today, some press from Saturday referencing PG&E's 
opposition to having Comrade Davis buy its Tx assets.


Power-Lines Deal
Davis, Edison come to terms but PG&E remains a balky holdout 
Lynda Gledhill, Chronicle Sacramento Bureau
Saturday,?February 24, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/02/24/M
N184206.DTL 
Gov. Gray Davis said yesterday he had reached an agreement with Southern 
California Edison to put the state's financially ailing utilities back on 
their feet - but Pacific Gas and Electric Co., crucial to any deal, remained 
a holdout. 
The key to the deal is state purchase of utility transmission lines, which 
would help the companies pay off debt they piled up selling electricity for 
less than it cost them. Edison will part with its lines for $2.76 billion, 
Davis said. 
But PG&E is reluctant to sell, and the governor said no deal will work 
without PG&E. 
In addition to agreeing to sell its transmission lines, Edison said it would 
produce inexpensive power to sell to the state for the next 10 years. 
At a news conference in Los Angeles, Davis said the agreement in principle 
with Edison "provides value to both sides. The utility gets the financial 
wherewithal to go back into business and keep our lights on. We get 
commensurate value in specific benefits, which provide us long-term power at 
very cheap rates." 
Davis' framework for righting California's wobbly energy market, however, 
hinges on a similar agreement with PG&E. Those familiar with the talks 
involving the utility, based in San Francisco, said discussions are moving 
"very, very slowly." 
"They are adamantly resistant to selling their transmission facilities," said 
Assemblyman Fred Keeley, D-Boulder Creek. 
Ron Low, a spokesman for PG&E, did not comment on Keeley's statement, but 
after talks concluded Thursday, Low said the two sides were "very far apart" 
on some issues. 
In a statement yesterday, PG&E Corporate Chairman Robert Glynn said the 
"discussions were an important milestone in the resolution of California's 
energy crisis." 
"Each utility's issues and opportunities in this crisis are different, and we 
believe that PG&E has proposed a detailed solution that balances ratepayer 
and shareholder interests," Glynn said. "We are confident that continued 
discussions can achieve a resolution for our company." 
Davis said he made "good" progress with Sempra Energy, the parent company of 
San Diego Gas & Electric, but only "some" progress with PG&E. 
Davis ruled out a deal that does not include PG&E. 
"I don't believe we can make a satisfactory arrangement without acquiring 60 
percent of the transmission lines. That, in turn, requires us to have an 
arrangement with PG&E," he said. The other 40 percent of the grid is owned by 
municipal utilities. 
Keeley said Davis is right to insist that PG&E be part of any deal. 
"I think the deal announced is a good first step, and will hopefully put 
pressure on the other companies," Keeley said. 
CRITICS CALL DEAL BAILOUT
The purchase price set for Edison's transmission lines is 2.3 times the 
system's book value. Although critics argue that represents a bailout, 
supporters of the plan say the lines are worth far more than book value. 
For example, the cost to replace all the utilities' transmission lines -- a 
figure that probably would come into play during a possible bankruptcy -- is 
estimated at $20 billion. If the state pays 2.3 times the book value for all 
three utilities' systems, it will pay $7.2 billion total. 
The agreement with Edison follows a framework Davis announced last week. In 
exchange for the purchase of the lines, Edison also agreed to return $420 
million that the utility had sent to its parent company, establish 
conservation easements on 20,000 acres of watershed for 99 years and drop all 
litigation against the state demanding the ability to immediately raise 
rates. 
Edison also agreed to continue to sell the power it produces to the state at 
cost for another 10 years. 
Edison said it still believed that it would have won its lawsuit to recover 
costs through a rate increase. But Edison International Chairman John Bryson 
said, "This agreement is far preferable to perhaps years of protracted 
litigation." 
NO RATE INCREASE
Davis continued to insist that the deal would not require a rate increase, 
although he has indicated that the rate increase adopted by the state Public 
Utilities Commission last month -- which was supposed to last 90 days -- 
would stay in place. 
Davis has been under pressure to meet deadlines he has imposed himself for 
making progress in the energy crisis, which he said were designed to reassure 
Wall Street. However, he also had a personal stake in making yesterday's 
announcement, as he left immediately for a five-day trip to the East Coast. 
Davis will spend four days at the National Governors Association in 
Washington, D.C., and a concurrent meeting of the Democratic Governors 
Association, which he chairs. 
Much of his time will be spent reassuring his fellow governors that the 
crisis is under control, as well as meeting with President Bush and Energy 
Secretary Spencer Abraham. 
DAVIS ON 'MEET THE PRESS'
Davis also will use the time to make national media appearances, including 
one on "Meet the Press" tomorrow. Garry South, Davis' political strategist, 
said the appearances will allow Davis to address some East Coast media 
accounts of the energy crisis. 
"A lot of misconceptions and myths have crept in," South said. "It's not 
helpful to California; it's not accurate on how the crisis came about and how 
we're trying to solve it." 
After he leaves Washington, Davis will spend a day in New York to meet with 
Wall Street analysts. Yesterday, he suggested that he would be asking for 
their support in California's quest for revenue bonds to help pay for power 
purchases. 
California will have spent $2.8 billion on power by next month, and its 
credit ratings have been downgraded by some analysts. 
Consumer advocates reacted with skepticism to Davis' tentative deal with 
Edison. 
Nettie Hoge, executive director of TURN, The Utility Reform Network, said she 
was displeased with the governor's plan because it commits ratepayers to 
paying off an unidentified portion of utility debt. 
"Nothing says what the final price tag is," she said. 
Dealing for Power 
-- Power lines: The state would buy Southern California Edison's transmission 
lines for about $2.7 billion, 2.3 times their estimated book value, to help 
bail out the financially strapped utility. 
-- Helping out: Edison parent Edison International would pay the utility 
about $420 million. 
-- Payback: Edison would drop its lawsuit seeking higher electricity rates 
and would to continue to sell the state cheap power for another 10 years. 
-- The other shoe: ''Some progress'' reported in talks over a similar deal 
with PG&E, which is reluctant to sell its lines. 
Source: Associated Press 
Other Developments 
ENERGY FORECAST
California enjoyed its second straight day without a power alert. Lori 
O'Donley, spokeswoman for the California Independent System Operator said 
continued warm weather around the West and completion of maintenance on some 
power plants that had been out of operation kept the state above the percent 
reserve mark. O'Donley said the state should remain out of the danger zone 
during the weekend. 
MORE MEGAWATTS COMING
Mirant Corp., announced that it signed a contract to provide 750 megawatts of 
power to the state during the month of March. "We became more confident in 
our ability to enter such a contract after we received full payment from the 
Department of Water Resources for a bill due Feb. 20," said Randy Harrison, 
executive director of the company's western operations. 
INDEPENDENT SYSTEM OPERATOR SETTLEMENT
Three generators reached a settlement with the California Independent System 
Operator to continue to supply emergency power to California until March 18 
even though it is unclear who will pay for much of that power. 
Reliant Energy Inc., Williams Cos. and Dynegy Inc. signed an agreement that 
effectively extended a U.S. District Court judge's temporary restraining 
order that had required the generators to supply power to the power grid 
operators. 
In the meantime, the three generators, along with Duke Energy Corp. and 
Mirant Corp., have asked the Federal Energy Regulatory Commission for an 
emergency order forcing the Independent System Operator to provide a 
creditworthy buyer for their power. 
The federal commission on Feb. 14 told the system operator that it could not 
force generators to take on "unacceptable financial risks" by selling without 
a reasonable expectation of being paid. 
CONSERVATION REWARD
State Sen. Don Perata, D-Oakland, said he will propose legislation to give $1 
billion to customers who conserve on their electricity bills during the 
summer months. Perata claims that his bill, which would pay consumers a $10 
refund for every megawatt hour saved, would reduce the amount of money that 
the state would have to spend buying power on the expensive spot market. 
Source: Chronicle staff report 
Chronicle staff writer Patrick Hoge contributed to this report. / E-mail 
Lynda Gledhill at lgledhill@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A1