Davis is moving at warp speed on bonds, too.  (No doubt this is connected 
with the state being placed on credit watch.)




Calif Pwr Bond May Be Delayed Until Aug - Gov. Advisor 


Updated: Friday, April 20, 2001 03:29 PM?ET 


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NEW YORK (Dow Jones)--California's planned issue of $12 billion to $14 
billion in revenue bonds to finance the state's cost of buying power could be 
delayed until August, an advisor to Gov. Gray Davis said Friday. 
The issue for now appears to be proceeding on schedule, but delays could come 
from regulatory appeals by California's utilities, which have objected to the 
details of plans to service the debt with revenue collected from their 
ratepayers, the advisor said. 








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"We hope it will be done this summer," said the advisor. "I think (the state 
treasurer) has said June. It might slip to July or August." 
The advisor said the issue's timing is ultimately up to State Treasurer Phil 
Angelides. A formal timeline for the issue hasn't been set, but a 
spokesperson for the treasurer said Angelides' June target hasn't changed. 
"That is still our operating goal," the spokesperson said. "We have not 
revised those or pushed those back because of the appeals." 
The state plans to use the revenue from the bonds to stretch out its costs of 
buying power in lieu of California's hamstrung utilities and to repay the 
state's general fund for power already purchased. The state has spent $4.4 
billion in general fund money on power since mid-January, a number growing by 
more than $70 million a day. 
The general-fund outlays technically are loans that carry interest charges. 
Nevertheless, delays in the bond issue may bring increased pressure from 
those concerned about the state's exposure, the advisor said. 

California's Department of Water Resources, which is handling the state's 
power purchases, will need to cover 41% of the 192 million megawatt-hours 
expected to be consumed by the state's largest utilities in 2001, the advisor 
said. 
The DWR's long-term contracts cover just over a third of that total, leaving 
the department to buy 48 million megawatt-hours of electricty - 25% of the 
utilities' demand - in the spot market, the advisor said. 
Western power for delivery this summer is trading at $400/MWh to $500/MWh, 
and power for the fourth quarter is trading at $200/MWh to $300/MWh. 
The DWR's spot-market purchases will fall to 14% in 2002, according to the 
Davis team's projections, the advisor said. 
As reported, Angelides has said that with power prices at $250/MWh, the 
planned bond issue will only cover the state's power purchases through 
September. The details of the DWR's power contracts and revenue requirements, 
however, haven't been released. Davis' advisor said they point to a much 
lower cost of power, one that can be managed with a bond issue in the lower 
end of the $12 billion to $14 billion range and without higher rates. 
"We project the financing mechanism will actually be in surplus by 2003," the 
adviser said. "We do have the tools to moderate this." 
If prices rise to "unreasonable levels," the state may opt to turn the lights 
out rather than pay them, the adviser said. 
"At some point, a decision will be made as a policy matter whether to pay the 
extra price or do a rolling blackout," he said. 
Outsiders are less optimistic than the state. Analysts continue to question 
the state's projections, and ratings agencies have put California's credit 
ratings on watch for a downgrade in light of the mounting power costs. 

Massive wholesale power costs have already crippled the state's two largest 
utilities, which haven't been able to recover $14 billion from customers, 
whose rates are frozen. PG&E Corp. (PCG, news, msgs) unit Pacific Gas & 
Electric Co. filed for bankruptcy-law protection April 6, and Edison 
International (EIX, news, msgs) unit Southern California Edison is insolvent. 
Last week, Southern California Edison and the DWR reached a memorandum of 
understanding under which the state would buy the utility's transmission 
lines and help it issue bonds to recover its uncollected power costs. 
The governor's negotiators plan to submit drafts of legislation need to 
implement the agreement to lawmakers next week. The drafts include 
authorization for the utilities to recover their power costs through bonds 
backed by a specified portion of their rates, authorization for the state to 
buy the utility's transmission lines and a variety of amendments to existing 
laws needed to facilitate the deal. 
"We will deliver the draft legislation to the Legislature early next week," 
one of the governor's legislative advisers said. 
The MOU requires the Legislature to act by Aug. 15, but Davis hopes to get 
the package through in four to six weeks. That may be optimistic. Republicans 
fiercely oppose the plan, as do a number of key Democrats who see it as a 
bailout. As reported, a number of lawmakers think ratepayers might be better 
off with Southern California Edison in bankruptcy. 
Davis met with lawmakers this week and is talking with the Senate leadershp 
to put together a small team to work through the bills, the legislative 
advisor said. The governor's negotiators are also in talks with lawmakers to 
add the measures to existing bills, namely a transmission-line buyout bill 
introduced months ago by Senate President Pro Tem John Burton and a broader 
bill introduced by Assembly Speaker Robert Hertzberg. So far, however, the 
governor hasn't found a backer. 
"We are having discussions, but we haven't identified the vehicle or the 
authors at this point," the legislative advisor said. 
Lawmakers have said the terms of the state's agreement with Southern 
California Edison will have to be altered, raising another roadblook for the 
deal. As reported, Edison has said the agreement must pass "as is," although 
the governor has expressed a willingness to negotiate. 
The governor's adviser said Friday any changes would have to maintain the 
balance of interests struck in the MOU. 
"If the Legislature wants to improve on it, it must keep that balance," he 
said. "(The governor) doesn't want the balance to be tipped in either 
direction." 
The governor's negotiators began discussions Monday with Sempra Energy (SRE, 
news, msgs) unit San Diego Gas & Electric for a similar deal, but had nothing 
to report. 
The parties were to meet again Friday and next week, and the governor hoped 
to reach agreement in the "next several weeks," the advisor said. 
-By Andrew Dowell, Dow Jones Newswires; 201-938-4430; 
andrew.dowell@dowjones.com