Calif Assembly GOP Releases 'Plan R' To
Rescue Elec Utils

Updated: Wednesday, May 23, 2001 04:14 PM ET

LOS ANGELES (Dow Jones)--California's Assembly Republicans on Wednesday
released
"Plan R", an alternative to Democratic proposals on how to restore the
state's financially
struggling utilities to solvency.

The plan put forth by the Republicans, who are in the minority in the
Assembly, would have
Edison International (EIX, news, msgs) unit Southern California Edison and
PG&E Corp.
(PCG, news, msgs) unit Pacific Gas and Electric Co. pay down debts by way
of a
dedicated-rate component taken from existing utility rates, including a
rate hike effective
March 27.

Plan R would also increase the utilities' future
return on
investment, and allow for cost recovery in the
future, a press
release said. The utilities have incurred more than
$14 billion
in undercollections because under a rate freeze
they couldn't
pass high wholesale power costs to customers.
Utility rates
are frozen through March 2002, unless state
regulators
decide to lift the freeze sooner.

To help lower rates, utilities would be required
under Plan R
to produce more short-term and long-term power as
well as
sign long-term contracts to hedge against real-time
price
spikes. Lower rates would also come from
negotiating
reduced prices for power bought from qualifying
facilities and
from negotiating with larger generators to accept
only 70% of
the money they are owed for past power deliveries.

"The critical element (of a 30% concession) must come from the governor's
leadership," said
Assembly Republican leader Dave Cox. "Republicans aren't going to support
any plan without
a comparable negotiated concession from generators by the governor."

The governor met with generators two weeks ago and asked them to accept 70
cents on the
dollar from utilities. Most haven't said definitively whether they are
willing to accept those
terms, although Reliant (REI, news, msgs) has flatly refused to accept less
than 100%.

Plan R is a response to Gov. Gray Davis' plan to buy SoCal Ed's
transmission lines for $2.76
billion and to help the utility issue $3 billion in bonds backed by
ratepayer revenue.

"The Republican plan is a shared solution that delivers more power to the
grid. The governor's
plan socks ratepayers with a staggering bill for transmission line junk,"
said GOP
Assemblyman Keith Richman.

Davis' agreement with SoCal Ed, announced more than five weeks ago, has
gotten a cold
reception from Democrats as well, who have proposed several "Plan B"
alternatives, two of
which are being taken more seriously than others.

One would have the state hold a five-year option to buy SoCal Ed's
transmission lines for their
$1.2 billion book value, and would allow the utility to sell bonds backed
by ratepayers for an
amount determined by state regulators. That plan would also require the
utility's creditors to
accept 75 cents on the dollar for money owed.

The other Plan B would allow Pacific Gas and Electric to issue bonds
secured by their assets
and use the revenue to pay creditors. In turn, the utility would pay an
assessment, essentially
a tax that would be used to service its debt.

The Republicans' Plan R applies to both utilities, a spokeswoman for the
Assembly
Republican Caucus said. It is meant, in part, to move things forward,
because the Democratic
proposals have encountered slow going as of late, both Democrats and
Republican
lawmakers say.

"Plan B has become Plan Backtrack," Cox said. "It is time to consider other
options."

But the Republican plan doesn't really offer much that is new, noted one
consumer advocate.
Democrats are already pushing for generators to accept less than what they
are owed, as
well as for long-term contracts and qualifying-facility price reductions,
said Michael Shames of
the Utility Consumers' Action Network.

"The irony of the Republican proposal is that it is remarkably similar to
the one being
developed by the Democrats. It would appear as though the Republicans are
trying to use a
trick that Bill Clinton mastered - taking the opposition's idea and calling
it his own," Shames
said.

The plan also doesn't explain how or why utilities would want to get back
into regulated
generation, vis-a-vis requiring them to produce more supply, Shames said.
As well, funding
the plan within current rates isn't possible, he said.

"The bottom line is, the Republicans aren't pushing anything new or
exciting. And in one case
(funding within give rates), not even feasible. But I'm glad they are
trying. I just wish they'd try
harder to do something in a bipartisan way rather than play political games
with the truth,"
Shames said.

-By Jessica Berthold, Dow Jones Newswires; 323-658-3872;
jessica.berthold@dowjones.com




Richard Costigan, III
Chief of Staff
Office of the Assembly Republican Leader
California State Assembly
Phone:(916) 319-2005