----- Forwarded by Jeff Dasovich/NA/Enron on 02/06/2001 03:30 PM -----

	David Parquet@ECT
	02/06/2001 02:40 PM
		 
		 To: Jeff Dasovich/NA/Enron@Enron, Christopher F Calger/PDX/ECT@ECT
		 cc: 
		 Subject: La times

Long article...Mentions Calpine offering 1000 MW at slightly higher than 5.5 
cents/kwh.


----- Forwarded by David Parquet/SF/ECT on 02/06/2001 12:37 PM -----

	"Cole Frates" <cfrates@azurix.com>
	02/06/2001 12:24 PM
	Please respond to cfrates
		 
		 To: <dparque@enron.com>
		 cc: 
		 Subject: La times




Tuesday, February 6, 2001 |  </cgi-bin/print.cgi> Print this story
</cgi-bin/print.cgi>

Davis Vows Plan for Edison, PG&E

 The governor says that by the end of the week he will have a strategy to
help the utilities avoid bankruptcy.

By DAN MORAIN and NANCY RIVERA BROOKS, Times Staff Writers

SACRAMENTO--Gov. Gray Davis said Monday he and legislative leaders would
have a plan by week's end to avert the bankruptcy of the state's two
biggest
utilities by trading ratepayer-backed bond money for utility assets.
"The drop-dead date is clearly Feb. 12," Davis said. That is when a federal
judge is set to hear a lawsuit by Southern California Edison, joined by
Pacific Gas & Electric, that could lead to sharp rate hikes for consumers
unless a rescue plan is in place.
Momentum has been building for a plan in which the state would get control
of the utility transmission lines in return for issuing bonds to give the
utilities a cash infusion.
But Senate President Pro Tem John Burton (D-San Francisco), who argues that
California should take control of the transmission grid, said he did not
share Davis' urgency to cut a deal this week.
The wrangling comes as the state faces the end early Wednesday of what
likely is the last federal emergency order requiring that independent power
generators sell electricity in California. The Bush administration insists
it will not extend the order.
"We're not even asking," Davis spokesman Steven Maviglio said.
Several such orders issued in the past two months have forced power
generators to keep electricity flowing to California, even though Edison
and
PG&E were unable to pay the skyrocketing wholesale costs of electricity.
But the federal emergency orders are less vital now that California has
relieved the utilities of having to buy power--at a cost to taxpayers of
roughly $45 million a day.
Davis, meanwhile, plans to announce today that California has entered into
its first long-term contracts to buy power from independent generators,
thereby beginning its shift away from the reliance on spot markets.
At least one firm, Calpine Corp., was on the verge late Monday of signing a
deal to provide the state with up to 1,000 megawatts for roughly 10 years.
One megawatt is enough to serve roughly 1,000 homes. The cost could not be
determined, but it is believed to be slightly above the 5.5 cents per
kilowatt-hour that Davis had hoped for.
"Clearly, we are no longer waiting for someone else to solve our problem or
do something to bail us out," Davis said at a Capitol news conference
Monday.
"We are doing everything within our power as a state to right this ship.
We're not waiting for someone to throw us a long pass. We're going to solve
it ourselves."
Davis said he will confer with Democratic and Republican legislative
leaders
this week to resolve the complex and controversial issue of providing "a
cash infusion to the utilities so they can be viable," in exchange for
utility assets.
The Democratic governor said he is not sure how the state will help the
financially hobbled companies. It may sell bonds, or guarantee bonds that
the utilities might sell.
Either way, the bonds would give the utilities cash to help them pay down
their debt, estimated at between $6 billion and $12 billion.
"It cannot be done without assistance from the state," Davis said.
Though Burton favors taking over the transmission grid, Davis supports
taking equity stakes in the companies themselves in the form of warrants,
similar to stock options. The warrants could be cashed in after the
utilities regain their stability and used to lower the cost of electricity
for consumers, or to soften future rate hikes.
"That state assistance, no matter what form it comes in, has a value,"
Davis
said. "It is my goal to make sure that whatever the state receives in
return
has comparable value."
Davis signed legislation last week allowing the state to sell an estimated
$10 billion worth of bonds to buy power in the future. The bonds would be
purchased by investors, who would be repaid over time by the ratepayers.
By selling bonds, the state in essence will be subsidizing consumers for
the
high prices of electricity in the first year or two. But consumers will pay
higher prices in later years when the cost of electricity is likely to drop
as more power plants are built.
In addition to selling bonds to pay for power in the future, Davis said,
the
state likely will sell bonds to help the utilities defray the past cost of
power.
State Treasurer Phil Angelides, who will oversee the bond process, said in
an interview that the state had little choice but to sell bonds for future
power purchases. But he said resolving the "past debts of the utilities" is
a tougher problem.
"There is no magic money here. Bonds require a repayment source," Angelides
said. "It needs to be a buyout versus a bailout."
The Democratic treasurer said that only after coming up with their own
reorganization plan should the utilities seek state assistance.
"At the end of the day, if there are some assets of value that we are
interested in as a buyer . . . that should be on the table."
Edison and PG&E have run up billions in debt in recent months as they paid
record high prices for wholesale power, yet were unable to pass on the full
cost of it to consumers.
On Monday, a federal judge in Los Angeles is scheduled to rule on Edison's
suit alleging that the California Public Utilities Commission must allow
the
utilities to pass on the multibillion-dollar cost of buying power.
Assemblyman Fred Keeley (D-Boulder Creek), among the lawmakers most
involved
in the Legislature's response to the energy crisis, said that if utilities
win the suit and are allowed to pass on the full cost of their power
purchases, consumers could be hit with an 86% rate increase.
"I don't think we can roll the dice and let that happen," said Keeley, who
along with Assembly Speaker Bob Hertzberg (D-Sherman Oaks) has been pushing
for an early settlement of the Edison lawsuit.
However, Burton, the Legislature's most influential member, shrugged off
the
Monday deadline.
"Trial courts rule. Appellate courts rule. Supreme Courts rule, and it's
three or four years down the road," Burton said.
In other developments Monday:
* Davis again used his emergency authority to claim $150 million worth of
contracts held by PG&E, shortly before they would have been taken by one of
the utility's creditors.
PG&E had defaulted on payments to the California Power Exchange, and the
entity, a sort of commodities market for electricity, wanted to auction off
the contracts. Davis took similar action with Edison contracts Friday.
The PG&E contracts will supply between 100 and 500 megawatts of electricity
for the remainder of 2001. The price of the power will be determined in
proceedings before the state Board of Control. But the state may find
itself
paying significantly more than the relative low prices specified in the
contracts.
* Edison revealed that one of its bank accounts was seized last month by a
creditor, General ReFinancial Products Corp., which contends it is owed
$8.8
million for early termination of a financial arrangement during the
utility's debt crisis.
Edison said in a filing with the U.S. Securities and Exchange Commission
that it has asked the federal court that gave the creditor permission to
attach the account to reverse course and stop the action. The account, with
a New York bank, contains $1.5 million, Edison said.
Edison noted in the same filing that it had $1.36 billion in cash on
Monday,
but has defaulted on several million dollars' worth of debt payments and
has
"deferred" payments totaling $743 million through Monday to electricity
suppliers.
If the Rosemead utility had made all of its debt and electricity payments
as
they came due, it would have run out of cash last Friday, Edison said. In
contrast, its parent company, Edison International is paying all of its
bills.
* Shares of Edison International rose 22 cents to close at $13.23 per share
Monday and PG&E Corp. fell 14 cents to close at $13.60 per share. Both
trade
on the New York Stock Exchange.
Standard & Poor's, a large credit rating agency, reaffirmed that
California's strong rating remains on its "Credit Watch Negative" list
following Thursday's passage by the Legislature of a bill giving the state
Department of Water Resources $500 million more to buy electricity for the
state.
California's general obligation bonds carry a rating of double-A.
* S&P also downgraded to "D"--or junk-bond level--the "issuer credit
rating"
of the California Independent System Operator, reflecting the fact that the
utilities are no longer paying their electricity bills.
The downgrade does not affect any operating funds of Cal-ISO, which are
generated by transmission fees, and does not include debt issued by the
state for Cal-ISO, which retains "insured triple-A" and "A-1 plus" ratings.

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