CALIFORNIA  SITUATION CLARITY IMPROVING; MOST LIKELY OUTCOME FAVORABLE FOR
ALL
* While we do not expect a direct rate increase or removal of the rate
freeze for EIX or PCG out of the California Public Utility Commission
meeting today, we are encouraged by the conciliatory tone of recent
comments.
* In our view, acerbic rhetoric has finally given way to pragmatic
reconciliation and it now appears that California utilities are on the path
towards effectively receiving the rate increases they require to remain
solvent.
* We believe this has implications not only for the health of the
affected utilities, but also for the Growth Energy Merchants and Competitive
Generators.
* While the credit risk associated with utilities' power market
purchases have not been solved yet, the credit risk in the California market
has eased somewhat.
* While trading may be choppy as the final California remedy is
hammered out, we recommend the purchase of the Growth Energy names
throughout any near-term weakness possible as a result of the process.
* Decision expected today at 4:00 PM EST.

 <<CA Situation Improving12-21-00.pdf>>


Raymond C. Niles
Power/Natural Gas Research
Salomon Smith Barney
(212) 816-2807
ray.niles@ssmb.com

s

Raymond C. Niles
Power/Natural Gas Research
Salomon Smith Barney
(212) 816-2807
ray.niles@ssmb.com

s




 - CA Situation Improving12-21-00.pdf