Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 03/21/2001 04:19 PM -----

	"Beiser, Megan" <Megan.Beiser@edelman.com>
	03/21/2001 03:42 PM
		 
		 To: "Aaron Thomas (E-mail) (E-mail)" <athomas@newenergy.com>, "Andrea Weller 
(E-mail) (E-mail)" <aweller@sel.com>, "andrew Chau (E-mail) (E-mail)" 
<anchau@shellus.com>, "Bill Chen (E-mail) (E-mail)" <bchen@newenergy.com>, 
"Douglas Oglesby (E-mail) (E-mail)" <doao@chevron.com>, "Fairchild, Tracy" 
<tracy.fairchild@edelman.com>, "Jeffrey Hanson (E-mail) (E-mail)" 
<jeff.hanson@phaser.com>, "jennifer Chamberlin (E-mail) (E-mail)" 
<jnnc@chevron.com>, "john Barthrop (E-mail) (E-mail)" 
<jbarthrop@electric.com>, "John Leslie (E-mail) (E-mail)" <jleslie@luce.com>, 
"Joseph Alamo (E-mail) (E-mail)" <jalamo@enron.com>, "Manuel, Erica" 
<Erica.Manuel@edelman.com>, "'Michael Nelson' (E-mail)" 
<mnelson@electric.com>, "Peter Bray (E-mail) (E-mail)" <pbray@newpower.com>, 
"Rebecca Schlanert (E-mail) (E-mail)" <rschlanert@electric.com>, "Richard 
Counihan (E-mail) (E-mail)" <rick.counihan@greenmountain.com>, "'Robert 
Morgan' (E-mail)" <rmorgan@newenergy.com>, "Sue Mara (E-mail) (E-mail)" 
<smara@enron.com>, "Allen, Stevan" <stevan.allen@edelman.com>, 
arm@phaser.com, "brbarkovich@earthlink.net" <bbarkovich@earthlink.net'>, 
cra@calretailers.com, dennis.flatt@kp.org, dhunter@smithandkempton.com, 
djsmith@smithandkempton.com, Dominic.DiMare@calchamber.com, 
drothrock@cmta.net, gharrison@calstate.edu, hgovenar@govadv.com, 
jackson_gualco@gualcogroup.com, ken_pietrelli@ocli.com, kgough@calpine.com, 
kmccrea@sablaw.com, kmills@cfbf.com, lhastings@cagrocers.com, mday@gmssr.com, 
mmoretti@calhealth.org, nplotkin@tfglobby.com, randy_britt@robinsonsmay.com, 
richard.seguin@kp.org, RochmanM@spurr.org, rrichter@calhealth.org, 
sgovenar@govadv.com, smccubbi@enron.com, spahnn@hnks.com, theo@ppallc.com, 
vincent.stewart@ucop.edu, vjw@ceert.org, "Warner, Jami" 
<jami.warner@edelman.com>, wbooth@booth-law.com, wbrown@lhom.com, 
wlarson@calstate.edu
		 cc: 
		 Subject: FW: Associated Press story: Power spending imperils state's finan 
cial health, controller says



> Power spending imperils state's financial health, controller says
> 
> Updated: March 21, 2001 - 3:11 p.m. 
> 
> California's power-buying on behalf of two strapped utilities is gutting
> its budget surplus and putting the state at financial risk, the state
> controller said Wednesday.
> 
> The surplus dropped from $8.5 billion in January, when the state began
> buying electricity for Pacific Gas and Electric Co. and Southern
> California Edison, to $3.2 billion now, Kathleen Connell estimates.
> 
> Connell ordered an audit of the state's power-buying, saying
> Gov. Gray Davis is withholding key financial information from her office
> and the Legislature.
> 
> Wednesday marked the first time in three days the state avoided rolling
> blackouts. Power grid officials credited cooling temperatures and the
> completion of repairs at several power plants.
> 
> Connell said the energy crunch now imperils the state's budget as well as
> its electric grid.
> 
> California has been spending about $45 million a day --$4.2
> billion so far -- to buy power for Edison and PG&E, both denied credit by
> electricity wholesalers.
> 
> The two utilities, California's largest, say they are nearly $14 billion
> in debt due to soaring wholesale power costs the state's deregulation law
> blocks them from recovering from customers.
> 
> Meanwhile, the state has faced high natural gas costs and a
> tight power supply driven in part by power plant repairs in
> California and scarce hydroelectric power in the Pacific Northwest.
> 
> Standard & Poor's has put the state on a credit watch due to its power
> purchases and chastised Davis, the Legislature and state regulators for
> not taking more aggressive steps to assure the utilities can pay their
> bills.
> 
> On Wednesday, Connell said she is refusing a request by Davis and the
> Legislature to transfer $5.6 billion into a "rainy day fund" she said was
> set up to impress Wall Street as the state prepares to issue $10 billion
> in revenue bonds to cover its power-buying.
> 
> Transferring the money would leave the state general fund $2.4 billion in
> debt, Connell said.
> 
> Sandy Harrison, spokesman for the state Department of Finance, and Keely
> Bosler of the Legislative Analyst's Office, said such transfers are
> routine and required by law.
> 
> They put the state's budget surplus at $5.6 billion.
> 
> "The law says she has to do it. The law does not give her the power to
> demand that kind of audit information," Harrison said.
> 
> He said the state's budget isn't in danger because it will be
> repaid with the $10 billion in long-term debt.
> 
> Connell said the scope of the proposed transfer is unprecedented and
> amounts to a "shell game" that disguises the power purchases' impact on
> the state budget.
> 
> Wells Fargo & Co. chief economist Sung Won Sohn said he sees little
> progress in efforts to fix the state's power problems and end state
> electricity purchases.
> 
> "If we're going to pour money into a bottomless pit, I would
> worry about the state's finances," he said. "At some point we're going to
> run out of money."
> 
> The controller's criticism of fellow Democrat Davis won support from
> Assembly Republicans and Secretary of State Bill Jones, a Republican
> considering challenging Davis next year.
> 
> Jones said he wants to announce his own plan to solve the
> state's energy woes, but can't unless Davis releases more financial
> details. He said his plan may involve giving the utilities low-interest
> loans with their transmission lines held as collateral.
> 
> Davis spokesman Steve Maviglio dismissed the criticism.
> 
> "Political grandstanding doesn't generate one more kilowatt of energy for
> California in this time of emergency," he said.
> 
> Maviglio said the administration has released the financial
> information it can without jeopardizing negotiations for long-term power
> contracts with wholesalers.
> 
> -- Associated Press
> 
> 
>