Re upcoming meeting bt Chairman Greenspan and Davis this Tuesday.

Passed on with regards from Maureen Raymond-Castaneda


---------------------- Forwarded by Gwyn Koepke/NA/Enron on 12/22/2000 03:56 
PM ---------------------------


"VINCENT KAMINSKI, ENRON CORP" <ERMS@bloomberg.net> on 12/22/2000 03:52:33 PM
To: gkoepke@ENRON.COM
cc:  

Subject: (BN ) Greenspan, California Governor Gray Davis to Meet (Up



      Story




Greenspan, California Governor Gray Davis to Meet (Update2)
12/22/0 16:25 (New York)

Greenspan, California Governor Gray Davis to Meet (Update2)

     (Adds comment from Standard & Poor's, background about Long
Term Capital Management, power producer New West.)

     New York, Dec. 22 (Bloomberg) -- Federal Reserve Chairman
Alan Greenspan agreed to meet California Governor Gray Davis on
Tuesday as soaring power bills threaten to put the state's two
biggest utilities into bankruptcy.
     ``Davis asked for this,'' said Steve Maviglio, spokesman for
the Democratic governor. ``He wants to talk with him about the
electricity situation in California and see if he has any ideas.''
     The meeting, to take place in Washington, comes as Pacific
Gas and Electric Co. and Southern California Edison struggle under
$8.1 billion of losses stemming from soaring power costs and
regulations barring them from raising prices.
     Fed officials have called Wall Street dealers who underwrite
the companies' short-term debt, or commercial paper, as well as
analysts, seeking information on the effect of the crisis in the
markets, two dealers said. A Fed spokeswoman declined to comment.
     With their credit rating under review for a possible
downgrade, the utilities can't sell more commercial paper. More
than $2 billion of the short-term debt matures in the next two
months. A default on the IOUs typically triggers defaults on a
company's other debt, which totals more than $20 billion for the
two utilities.

                             Fed Role

     As the overseer of the U.S. banking system, the Fed monitors
potential financial crises for any possible ripple effect that
could hurt the economy. The central bank in 1998 brokered a $3.6-
billion bailout of Long-Term Capital Management by more than a
dozen banks and securities firms after the near-collapse of the
hedge fund roiled world markets.
     Now, with growth slowing and banks curbing lending, ``a
credit issue can pose the potential to become a systemic threat,''
said Jim Glassman senior U.S. economist at Chase Securities.
``What is strictly an event not related to the economy in a narrow
sense could fuel the fears of other issues like this.''
     Edison, in a regulatory filing this week, said it may have no
choice but to seek bankruptcy protection, while California -- has
considered blackouts if the utilities can't continue buying power.
     Standard & Poor's, which earlier this week indicated it was
prepared to cut ratings on the utilities to junk status, today
left ratings unchanged. It said it did so in part because the
heightened involvement of senior government officials ``suggests
that the utilities may be spared from insolvency.'' The rating
company still has their debt under review for a possible cut.

                             Politics

     The meeting with Greenspan could help Davis show the crisis
has national implications, muting opposition to a poltically
unpopular rate increase.
     The California Public Utilities Commission, which must
approve increases, yesterday said they would hear arguments about
a price rise next week, though the earliest they would bring the
issue to a vote would be Jan. 4.
     ``The commission made a late first step when they should be
running,'' said Paul Patterson, an analyst at Credit Suisse First
Boston who has ``hold'' ratings on both companies.
     Shares of San Francisco-based PG&E Corp. -- the parent of
Pacific Gas and Electric -- rose $1.81 to $20.06. Shares of
Rosemead, California-based Edison International -- which owns
Southern California Edison -- gained $1.31 to $16.25.
     In addition to the losses, PG&E has a commercial paper
program of $1.85 billion, some or most of which may come due
within the next four weeks.

                            `Lifeblood'

     Southern California Edison has a commercial paper program of
$1.6 billion. With both companies under review for a possible debt
ratings cut from both S&P and Moody's Investors Service, they're
effectively barred from issuing new commercial paper.
     ``The commercial paper market is the lifeblood of the credit
markets,'' said Tom Gallagher, a Washington-based at ISI Group
Inc. ``If all of the sudden there's a problem there, credit
markets can freeze up really fast.''
     Under typical circumstances, the companies would use backup
credit lines to refinance the commercial paper if they couldn't
issue new commercial paper.
     Yet Southern California Edison is having troubling convincing
lenders led by Chase Manhattan Corp. to renew a $1 billion credit
line that backs up its $1.6 billion commercial paper program,
according to people familiar with the matter.

                         Allowed to Borrow

     In the case of PG&E, the company has borrowed up to its
authorized limit, including part of a $1 billion backup line
arranged by Bank of America Corp. two months ago, according to a
Securities and Exchange Commission filing. The California PUC
yesterday granted the utility's request to raise an additional $2
billion with long-term debt.
     PG&E's existing long-term debt stood at $6.5 billion as of
Sept. 30, according to a filing with the SEC. Edison International
had $12.5 billion in long-term debt as of Sept. 30, a separate SEC
filing showed.
     California has faced the prospect of blackouts because
electricity providers in the U.S. Northwest refused to sell power
to the utilities over concerns they couldn't pay. Rolling
blackouts were averted earlier this month after state and federal
agencies provided last-minute supplies.

                        Emergency Declared

     PG&E serves San Francisco and the surrounding area. Edison is
serves the area around the city of Los Angeles, which itself has a
municipal utility, the Department of Water and Power.
     The California Independent System Operator, which manages the
state's power grid, yesterday said it may cut power to some
industrial users after electricity reserves dropped again. It is
the 35th time the operator has declared a so-called stage two
emergency.
     New West Energy, the trading unit of Arizona utility Salt
River Project, withdrew from the California market this week,
calling it too risky. The company has held up to $72 million in
monthly IOUs from California utilities, said spokesman Frederick
Bermudez.
     ``If the utilities go bankrupt, the ISO goes bankrupt and
California could go dark,'' he said. ``If that happens, somebody
will be left holding the bag and we are trying to make sure it is
not us.''

--Mark Lake and Liz Goldenberg in the New York newsroom (212) 893-
5989 or mlake1@bloomberg.net, and Noam Neusner in Washington and
Dan Taub in Los Angeles with reporting by Jim Polson in Princeton
/bw/jdh

Story illustration: {LN033000 <CORP> DES <GO>} to see Southern
California Edison's existing $1 billion credit line.

For Pacific Gas & Electric's CP program, see
{PCG <Mmkt> DES <GO>}

For Southern California Edison's cp program, enter
{SCE <Mmkt> DES <GO>}

EIX US <Equity> CN
PCG US <Equity> CN
CMB US <Equity> CN
BAC US <Equity> CN

NI UTI
NI COS
NI FEA
NI CA
NI US
NI NRG
NI ELC
NI CMD
NI FIN
NI LOANS
NI SYNLOANS
NI CORPFIN
NI BON
NI COR
NI NEWBON
NI BCY
NI OR
NI CP
NI MMK
NI FRN
NI MTN
NI BNK
NI USB
NI NOB


-0- (BN ) Dec/22/2000 21:25 GMT