Note:  FYI

Fitch Puts 2 CA Utilities on Negative Watch 

In the midst of the continuing uncertainty over regulatory treatment of 
growing wholesale electricity cost under-collections, Fitch Tuesday assigned 
a "rating watch negative" designation to the securities of California's two 
largest investor-owned utilities, Pacific Gas and Electric and Southern 
California Edison (and its parent company, Edison International). In 
addition, it lowered Edison's commercial paper rating one notch to "F1" from 
"F1+". 

Fitch cited the need for "significant and extensive regulatory decisions" to 
resolve the continuing problem of retail utility electric rate 
under-collections plaguing both utilities. It indicated that with the "watch 
negative" status, the independent rating service expects to review the 
ratings within six months. 

A spokesperson for PG&E Corp., the parent of Pacific Gas and Electric, said 
the Fitch move doesn't lower any of its ratings, but it "underscores the 
seriousness of the situation (in California) and the need for all the parties 
to come together for a collaborative solution." The companies have asked for 
relief from the California Public Utilities Commission (see Daily GPI, Oct. 
30). Edison is the target of an investors' lawsuit which accuses it of 
illegally booking as revenue the wholesale power costs that have yet to be 
collected. (see Daily GPI, Nov. 1). 

The Fitch move had no effect on PG&E's latest utility debt line extension of 
$1.3 billion that was implemented recently in response to the continuing 
under-collections, the spokesperson said. Fitch reiterated that through 
September the two utilities had booked under-collections exceeding $5 billion 
collectively and that wholesale power prices continue to exceed the 
utilities' frozen retail rate levels. 

"While these amounts exceed immediate funding requirements, their recovery 
through rates is uncertain," Fitch stated in its announcement on the negative 
watch. "Barring a change in regulatory policy, PG&E and SoCal Edison 
anticipate they will be unable to recover their under-collections before the 
end of the statutory rate freeze period ending March 31, 2002. 


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