---------------------- Forwarded by Carla Hoffman/PDX/ECT on 12/13/2000 12:19 
PM ---------------------------
   
	Enron Capital & Trade Resources Corp.
	
	From:  "Pergher, Gunther" <Gunther.Pergher@dowjones.com>                      
     12/13/2000 11:10 AM
	

To: undisclosed-recipients:;
cc:  
Subject: DJ PG&E: Will Keep Borrowing Until Lenders Say 'No More'



19:04 GMT 13 December 2000 =DJ PG&E: Will Keep Borrowing Until Lenders Say
'No More'

   By Mark Golden
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--How long can PG&E Corp. (PCG) continue to buy power at
$500 a megawatt-hour and sell it at $54? As long as banks continue to say it
can, according to the spokesman for PG&E's regulated utility Pacific Gas &
Electric Co.
"That decision belongs to the lending institutions. They have to make the
decision if lending us money is a prudent investment for them," utility
spokesman Ron Low said in an interview late Tuesday.
From May through November, the utility spent $4.6 billion more to buy
electricity in skyrocketing bulk power markets than it can charge its
customers, who have frozen rates.
And December purchases so far have been more expensive than those of any
previous month. Since the California Independent System operator lifted its
$250/MWh price cap over the weekend, the northern California wholesale power
market has traded between $450-$1,000/MWh. Such prices are expected to be
common this winter.
About two-thirds of the $4.6 billion difference was paid by PG&E to outside
electricity suppliers. PG&E had to borrow this amount from the credit
markets.
About one-third of the $4.6 billion was paid into an account for income from
power plants that PG&E still owns, funds which the company controls. The
California Public Utilities Commission indicated Tuesday that it will
authorize the state's utilities to use power plant profits to pay off some
of their debts.
That CPUC move will be totally inadequate, according to the PG&E and Edison
International's (EIX) Southern California Edison. Their request for a
customer rate increase was rejected by the CPUC last week.
On Tuesday, the PUC proposed an order rejecting the utilities' overall
approach to fixing California's power market. The PUC will take a final vote
on Dec. 21 on that order, which promises to "continue to monitor the impact
on the utilities."
For now, PG&E is left to borrow about $750 million a month to fund the
electricity losses.
"We need the state to begin immediately addressing the issue. There is time
to avoid a very serious problem which would affect all of California, but
inaction will rapidly result in a collapse of the entire energy system and
with it the economy," Low said.
Presumably, that means the collapse of Pacific Gas & Electric as well.
"That's up to the institutions that are lending us money. The company has a
strong financial history, which allows us to go out and borrow money and buy
power for our customers. It can't go on forever," said Low.
Almost all of the utility's debt is recourse debt of the parent company,
PG&E Corp. The corporation spokesman, Greg Pruett, said that for now the
parent company is actively engaged in helping the utility fund the power
purchases.
'"We review this on a daily basis, but it can't go on forever. The
two-minute warning has sounded and there are seconds remaining in the game,"
Pruett said.
"This debt - $4.6 billion - is more than half of the market capitalization
of PG&E Corp. That's huge and it's got to stop," Pruett said.
When asked if California Governor Gray Davis is willing to let the state's
utilities go bankrupt, Davis' spokesman said Wednesday that "the governor
doesn't want to comment until he finds out more about the situation."
Enron Corp. (ENE), as one of the big beneficiaries of the higher prices for
bulk power supplies, has some concern about the credit strain, "but I can't
imagine the state letting the utilities go into bankruptcy," Enron Chairman
Kenneth Lay said Wednesday.
"The utilities will have a difficult time raising the funds unless state
gives a guarantee," Lay said.
-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com

(END) Dow Jones Newswires 13-12-00
1904GMT Copyright (c) 2000, Dow Jones & Company Inc

G_nther A. Pergher
Senior Analyst
Dow Jones & Company Inc.
Tel.  609.520.7067
Fax. 609.452.3531

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