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Date: Tue, 08 May 2001 08:51:33 -0500
From: "Tracey Bradley" <tbradley@bracepatt.com>
To: "Justin Long" <jlong@bracepatt.com>
Cc: "Aryeh Fishman" <afishman@bracepatt.com>, "Andrea Settanni" 
<asettanni@bracepatt.com>, "Charles Ingebretson" 
<cingebretson@bracepatt.com>, "Charles Shoneman" <cshoneman@bracepatt.com>, 
"Deanna King" <dking@bracepatt.com>, "Dan Watkiss" <dwatkiss@bracepatt.com>, 
"Gene Godley" <ggodley@bracepatt.com>, "Kimberly Curry" 
<kcurry@bracepatt.com>, "Michael Pate" <mpate@bracepatt.com>, "Paul Fox" 
<pfox@bracepatt.com>, "Ronald Carroll" <rcarroll@bracepatt.com>
Subject: Calif. Assembly approves $13.4 bln power bond sale
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FYI

Calif. Assembly approves $13.4 bln power bond sale
Monday, May 07, 2001 11:18 PM ET


(updates with vote, quotes from governor, treasurer)
By Joshua Chaffin

SACRAMENTO, Calif., May 7 (Reuters) - The California Assembly approved a plan 
Monday to sell $13.4 billion in bonds to pay for electricity during the 
state's power crisis, marking what would be the biggest municipal bond issue 
in U.S. history.

The bill, approved 49-29, now moves to the Senate for a concurrence vote. But 
the state cannot sell the bonds until at least August because lawmakers 
Monday were short -- by five Republican votes -- of the two-thirds majority 
needed to pass the measure as emergency legislation that would have taken 
effect immediately.

Gov. Gray Davis blasted Republicans for "playing partisan politics" with an 
energy crisis that threatens the world's sixth biggest economy.

California's power purchases have drained the state treasury of some $6 
billion, spurring state officials to warn that the nation's most populous 
state risks costly financial ratings downgrades and could see funding shut 
off for important programs such as health or education.

The bond issue is intended to pay the state back, with the debt to be paid 
off over 15 years through a portion of Californians' monthly power bills.
"
The Assembly Republicans' refusal to support emergency legislation puts the 
state's fiscal integrity at great and continuing risk, and does great serious 
harm to essential services from education to public safety to health care," 
State Treasurer Phil Angelides said in a statement.

Now Angelides -- who wanted to issue the debt by June -- will have to wait at 
least 90 days for it to take effect as regular legislation. Senate President 
John Burton said the upper chamber would take up the measure no later than 
Thursday, before handing it on to Davis.

Assembly Republicans refused to support issuing so much debt and instead 
proposed a more limited bond proposal that used the state's budget surplus to 
pay off power purchases.

"This is a blank check drawn on the ratepayers' accounts," Assembly 
Republican Mike Briggs said in a statement.

Still, authorizing the bond amount is a step toward ensuring a $5 billion 
bridge loan aimed at helping the state weather the energy crisis until the 
treasurer can issue the debt.

"It would have been preferable to have had this done on an urgency basis," 
said Assemblyman Fred Keeley, a Democrat who has taken on a leading role 
during the energy crisis. "It would have sent a more confident message to the 
Street. Our choice was do it on this basis or do nothing."

The state's power crisis stems from a bungled 1996 deregulation plan that 
allowed wholesale electricity prices to soar but capped retail rates. The 
result has brought a spotty power supply, rolling blackouts and forced the 
state's biggest utility into bankruptcy protection.

The state legislature earlier this year approved issuing at least $10 billion 
in debt to pay for emergency power purchases.

That plan, however, tied the bond amount to the California Procurement 
Adjustment, a formula that divided revenues from consumers' electricity bills 
between the state and its two biggest utilities.

When PG&E (PCG, news) Corp.'s Pacific Gas & Electric challenged the CPA in 
bankruptcy court last month to demand a bigger slice of the pie, the bond 
sale was effectively scrapped -- leaving officials and lawmakers scrambling 
both to come up with a total amount and to authorize Angelides to issue bonds.


Copyright 2001 Reuters Limited.