Message-ID: <23651793.1075851637466.JavaMail.evans@thyme> Date: Wed, 5 Sep 2001 14:15:47 -0700 (PDT) From: alan.comnes@enron.com To: bryan.gottfredson@enron.com, joseph.alamo@enron.com, kate.bauer@enron.com, rob.bradley@enron.com, tom.briggs@enron.com, london.brown@enron.com, janet.butler@enron.com, guillermo.canovas@enron.com, shelley.corman@enron.com, jeff.dasovich@enron.com, larry.decker@enron.com, karen.denne@enron.com, marcus.dotson@enron.com, markus.fiala@enron.com, lamar.frazier@enron.com, janel.guerrero@enron.com, bob.hansen@enron.com, joe.hartsoe@enron.com, chris.holmes@enron.com, a..hudler@enron.com, evan.hughes@enron.com, amr.ibrahim@enron.com, j..kean@enron.com, alberto.levy@enron.com, elizabeth.linnell@enron.com, chris.long@enron.com, peggy.mahoney@enron.com, jeannie.mandelker@enron.com, susan.mara@enron.com, luiz.maurer@enron.com, karen.moore@enron.com, andrew.morrison@enron.com, carin.nersesian@enron.com, robert.neustaedter@enron.com, nicholas.o'day@enron.com, pr <.palmer@enron.com>, alex.parsons@enron.com, dave.perrino@enron.com, l..petrochko@enron.com, melinda.pharms@enron.com, michael.roan@enron.com, linda.robertson@enron.com, m..schmidt@enron.com, mary.schoen@enron.com, bryan.seyfried@enron.com, richard.shapiro@enron.com, ban.sharma@enron.com, john.shelk@enron.com, john.sherriff@enron.com, pat.shortridge@enron.com, roberta.staehlin@enron.com, d..steffes@enron.com, peter.styles@enron.com, kathleen.sullivan@enron.com, lora.sullivan@enron.com, jennifer.thome@enron.com, lysa.tracy@enron.com, michael.tribolet@enron.com Subject: RE: CA Issues--Daylight For Gray Davis Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Comnes, Alan X-To: Gottfredson, Bryan , Alamo, Joseph , Bauer, Kate , Bradley, Rob , Briggs, Tom , Brown, Michael - COO London , Butler, Janet , Canovas, Guillermo , Corman, Shelley , Dasovich, Jeff , Decker, Larry , Denne, Karen , Dotson, Marcus , Fiala, Markus , Frazier, Lamar , Guerrero, Janel , Hansen, Bob , Hartsoe, Joe , Holmes, Chris , Hudler, Shirley A. , Hughes, Evan , Ibrahim, Amr , Kean, Steven J. , Levy, Alberto , Linnell, Elizabeth , Long, Chris , Mahoney, Peggy , Mandelker, Jeannie , Mara, Susan , Maurer, Luiz , Moore, Karen , Morrison, Andrew , Nersesian, Carin , Neustaedter, Robert , O'Day, Nicholas , Palmer, Mark A. (PR) , Parsons, Alex , Perrino, Dave , Petrochko, Mona L. , Pharms, Melinda , Roan, Michael , Robertson, Linda , Schmidt, Ann M. , Schoen, Mary , Seyfried, Bryan , Shapiro, Richard , Sharma, Ban , Shelk, John , Sherriff, John , Shortridge, Pat , Staehlin, Roberta , Steffes, James D. , Styles, Peter , Sullivan, Kathleen , Sullivan, Lora , Thome, Jennifer , Tracy, Lysa , Tribolet, Michael X-cc: X-bcc: X-Folder: \Dasovich, Jeff (Non-Privileged)\Dasovich, Jeff\Inbox X-Origin: DASOVICH-J X-FileName: Dasovich, Jeff (Non-Privileged).pst Daylight For Gray Davis=20 By David S. Broder Wednesday, September 5, 2001; Page A19=20 SACRAMENTO -- The lights are dimmed in the office of California Gov. Gray D= avis, but his prospects of winning reelection next year and becoming a 2004= Democratic presidential possibility are looking a lot brighter than they w= ere just a few months ago. The office air-conditioning is imperceptible, despite the outside temperatu= re of 105 degrees, as Davis practices the energy conservation he has been p= reaching. But overall, the summer has been mild, electric power usage is do= wn 12 percent from last year and there hasn't been a blackout anywhere in t= he state since May 8. Republicans, who had set up a Web site to record the expected energy crisis= , concede that Davis has dodged a disaster. Always cautious, the governor s= ays, "So far, so good, but you never talk about a possible no-hitter in the= middle of the game." In fact, Davis is not home free. He is pushing a financial bailout bill to = avert bankruptcy for Southern California Edison, a bill opposed by both fre= e-market Republicans and liberal Democrats in the legislature. Sale of bond= s to replace the billions the state spent buying power last winter and spri= ng has been held up by litigation from already bankrupt Pacific Gas and Ele= ctric, leaving a potential hole in the current-year budget and ensuring tha= t the election-year fiscal situation likely will be grim. Drought condition= s threaten a water shortage next year. Private polls show clear vulnerabilities for Davis. Despite a drop in publi= c fears of an energy crisis and some increasing optimism about the overall = direction of the state, two August surveys I was shown found fewer than one= -third of Californians favor reelecting Davis, while two-thirds say he shou= ld definitely be replaced or they would consider an alternative. His job ap= proval scores are as poor as those of President Bush, who lost California i= n a landslide last November. The polls show a notable Davis weakness among Democrats, and one veteran lo= bbyist here told me that the governor was "just one blackout away from draw= ing a serious primary opponent" -- one reason that Davis last week preempti= vely staged a show of support from the Democratic mayors of seven big citie= s. But the potential vulnerability may never be tested. Davis has $30 million = in the bank and is headed for a $50 million war chest. California has not d= enied a sitting governor a second term since 1942, reelecting two Democrats= and four Republicans, most recently Pete Wilson, who was in much worse sha= pe politically in 1993 than Davis is now. And all three potential Republican gubernatorial candidates have liabilitie= s. Wealthy businessman William Simon Jr., son of the former Treasury secret= ary, has impressed Republican insiders as personable and smart. But he has = never run for office before and is unknown to the voters, who have showed s= kepticism about first-time millionaire candidates in both parties. Secretary of State Bill Jones, the only Republican in statewide office, has= been Davis's most aggressive and effective critic, zeroing in on conflicts= of interest in the stock holdings of several Davis energy advisers and app= ointees. But Jones left the Bush campaign early in the battle for the 2000 = nomination to endorse Sen. John McCain, and the White House reportedly has = told GOP contributors not to help him. Two McCain allies, Sens. Fred Thomps= on and Chuck Hagel, are coming out to raise money for Jones next month, but= his treasury is anemic. The White House favorite is former Los Angeles mayor Richard Riordan, who w= on two races in that heavily Democratic city. Riordan is 71 and, as Davis p= oints out, has never run statewide or in a partisan contest. Conservatives = question his liberal social policy positions, and Jones notes pointedly, "R= iordan and his wife have contributed more than $1.5 million against Republi= can candidates, including $80,000 to Gray Davis in past races." With its growing population of minorities, California looks even to busines= s lobbyists more and more like a solidly Democratic state, where Republican= victories will be the exception. GOP leaders in the legislature and the co= ngressional delegation appeared last week to be ready to accept redistricti= ng plans that would save their current seats but lock them into minority st= atus for the next decade. Bush, who was once seen by California GOP leaders as their salvation, now s= eems to some of them to have turned his back on the state. He has visited o= nly once since taking office, and one GOP official told me, "The only Cabin= et member we ever see out here is [former Californian] Ann Veneman," the se= cretary of agriculture. It is a complete reversal of fortune for the home base of Earl Warren, Rich= ard Nixon and Ronald Reagan, and Gray Davis is the lucky beneficiary of thi= s historic shift. ? 2001 The Washington Post Company=20 -----Original Message----- From: =09Gottfredson, Bryan =20 Sent:=09Tuesday, September 04, 2001 3:01 PM To:=09Alamo, Joseph; Bauer, Kate; Bradley, Rob; Briggs, Tom; Brown, Michael= - COO London; Butler, Janet; Canovas, Guillermo; Comnes, Alan; Corman, She= lley; Dasovich, Jeff; Decker, Larry; Denne, Karen; Dotson, Marcus; Fiala, M= arkus; Frazier, Lamar; Gottfredson, Bryan; Guerrero, Janel; Hansen, Bob; Ha= rtsoe, Joe; Holmes, Chris; Hudler, Shirley A.; Hughes, Evan; Ibrahim, Amr; = Kean, Steven J.; Levy, Alberto; Linnell, Elizabeth; Long, Chris; Mahoney, P= eggy; Mandelker, Jeannie; Mara, Susan; Maurer, Luiz; Moore, Karen; Morrison= , Andrew; Nersesian, Carin; Neustaedter, Robert; O'Day, Nicholas; Palmer, M= ark A. (PR); Parsons, Alex; Perrino, Dave; Petrochko, Mona L.; Pharms, Meli= nda; Roan, Michael; Robertson, Linda; Schmidt, Ann M.; Schoen, Mary; Seyfri= ed, Bryan; Shapiro, Richard; Sharma, Ban; Shelk, John; Sherriff, John; Shor= tridge, Pat; Staehlin, Roberta; Steffes, James D.; Styles, Peter; Sullivan,= Kathleen; Sullivan, Lora; Thome, Jennifer; Tracy, Lysa; Tribolet, Michael Subject:=09CA Issues Energy conservation efforts leave California blackouts in the dark=09The Mi= lwaukee Journal Sentinel =0909/04/2001=20 Sunny California never lost power So much for predicted blackouts=09The Was= hington Times =09=09=0909/04/2001=20 Public Power Utilities' Outlook Stable: =09=09=09=09=09Capital Markets Repo= rt =09=0909/04/2001=20 Preview / WEEK OF SEPT. 3-SEPT. 9 Bill to Rescue Edison Is Set for Review =09=09=09=09=09=09=09=09=09=09Los Angeles Times =09=09=0909/03/2001=20 Idea of Edison Bankruptcy Gains Currency Utilities=09=09=09Los Angeles Time= s =09=09=0909/02/2001=20 Williams files as creditor in PG&E case=09=09=09=09=09Tulsa World =09=09=09= =0909/01/2001=20 USA: Williams files $591 mln claim in PG&E bankruptcy=09=09=09Reuters Engli= sh News Service =09=0908/31/2001=20 Now Davis Doing Too Much, Energy Critics Say=09=09=09=09Los Angeles Times= =09=09=0909/04/2001 Calif Consumer Group Has 30K Signatures Vs Edison Rescue =09=09Dow Jones=09= =09=09=0909/04/2001 Eleventh Hour Chimes For California's Edison Rescue Deal =09=09Dow Jones=09= =09=09=0909/04/2001 Fitch Rates California $5.7B RANs F1+ =09=09=09=09=09Fitch=09=09=09=09=0909= /04/2001 Dan Walters: State's infrastructure crisis grows, but no one seems to have = a plan =09=09=09=09=09=09=09=09=09=09Sac. Bee=09=09=09=0909/04/2001 State's long-term power contracts could be too high all way to 2010 =09San = Diego Tribune=09=09=0909/03/2001 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= --------------- Energy conservation efforts leave California blackouts in the dark JOHN WOOLFOLK 09/04/2001=20 The Milwaukee Journal Sentinel=20 Final=20 Page 03A=20 Copyright 2001 Journal Sentinel Inc. (Note: This notice does not apply to t= hose news items already copyrighted and received through wire services or o= ther media)=20 Energy conservation efforts leave California blackouts in the dark=20 State has reported no shutdowns since May=20 By JOHN WOOLFOLK=20 Knight Ridder News Service=20 Tuesday, September 4, 2001=20 San Jose, Calif. -- This was supposed to be California 's summer of darknes= s, but as the summer draws to a close without any blackouts, the doomsayers= are proving to be wrong.=20 Just a few months ago, they talked about 20 hours of rolling blackouts. Or = 250 hours. Even 1,000 hours. But the blackouts stopped in early May.=20 Mild weather and surprisingly strong consumer conservation saved the day, w= ith help from new power plants and market controls. Consider:=20 -- State officials had hoped to lower peak power demand by 2,300 megawatts = -- about equal to a nuclear power plant -- with a $600 million effort to pr= omote conservation and efficiency. Consumers saved as much as 5,500 megawat= ts.=20 -- Average temperatures were above normal in June, but not as high as last = year, and cooler than normal in July and August. More important, there have= n't been the severe regional heat waves that strain the power grid.=20 -- Six new power plants have gone online so far this summer, totaling more = than 1,600 megawatts. The three largest, accounting for 1,400 megawatts, ha= d been in the works for years. The others were rushed into production under= a state effort to boost peak supplies.=20 -- Tougher federal regulations enacted in May and June prohibit California = power plant owners from withholding power from the grid in emergencies and = appear to be curtailing "megawatt laundering" schemes.=20 Which played the greatest role may be debated for years. But even if it was= mostly just good weather, Gov. Gray Davis is praising Californians.=20 Davis had initially urged consumers to cut back 8%, then upped it to 10% an= d offered 20% rebates to those who conserved 20% over last year.=20 State officials expected 10% to qualify for the rebates, but about a third = of customers are getting them, and consumers have cut peak demand as much a= s 14%, according to the California Energy Commission.=20 Conservation a surprise=20 "We were lucky to have the combination of bringing more power plants online= , extraordinary weather and the heroic efforts of Californians," said Davis= spokesman Roger Salazar. "A tremendous amount of the credit for not having= the blackouts is directly a result of the efforts of Californians to conse= rve energy."=20 Energy-efficient products flew out of stores. The Home Depot reported that = sales of portable generators doubled, low-watt fluorescent bulbs were up 15= 0% and window films -- used to lower air conditioning demand -- were up 25%= , said spokeswoman Kathryn Gallagher.=20 Those who spent the summer working in dim, sweaty offices, air- drying thei= r clothes and snapping up all things energy efficient say they didn't reall= y buy the dire blackout forecasts.=20 "I really do think they exaggerated," said Agnes Grossinger of San Jose. Bu= t she's not ashamed of her efforts to save power by not using anything elec= tric until the evening. It's saved her $280 in electric bills, and she plan= s to keep doing it.=20 Those who had predicted disaster say consumer conservation surprised them.= =20 "The big thing was that we didn't use the electricity ," said Lon House, an= energy consultant for the state who had forecast 1,000 hours of blackouts,= based on meager conservation in San Diego last summer. "The energy conserv= ation surprised everybody. I didn't think we could do it."=20 Some say weather a factor=20 Conservation advocates agree, saying that lowered consumption played a big = role in easing the state's power demand.=20 "We didn't get lucky with the weather," said Ralph Cavanagh, energy special= ist with the Natural Resources Defense Council. "There's no question in our= opinion that the overwhelming factor in explaining the reduction in statew= ide energy use is energy efficiency."=20 But energy market experts find that hard to believe.=20 "The weather has obviously been the biggest contributor to avoiding blackou= ts," said Severin Borenstein, director of the University of California Ener= gy Institute in Berkeley.=20 For the governor's critics, the summer blackout no-show has been deflating.= They snapped up 15,000 "Blackouts 2001, Gray Out 2002!" bumper stickers an= d launched a Web page screaming blackouts were "unavoidable."=20 But the blackout counter remains frozen at 6, the last on May 8. Critics sa= y the governor got lucky but concede he did well in motivating conservation= . Sunny California never lost power So much for predicted blackouts Thomas D. Elias 09/04/2001=20 The Washington Times=20 2=20 Page A3=20 (Copyright 2001)=20 LOS ANGELES - Remember all those doomsday forecasts of blackouts rolling ac= ross California day after day, hour after hour, all summer long? They turne= d out a lot like the warnings of the much-vaunted Y2K problem: a lot of hot= air, a paper tiger, a complete no-show.=20 With summer almost gone, no part of California has experienced so much as o= ne second of power outage, as expected, from the supply shortages that have= plagued the state since May 8.=20 Wind damage to power lines, yes. Short circuits, occasionally. But systemat= ic blackouts, none.=20 That's in stark contrast to the forecasts of so-called experts.=20 The California Independent System Operator, which runs the state's power gr= id, said in April that Californians could expect at least 34 days of rollin= g blackouts in the summer months if they used as much electricity as last y= ear.=20 The North American Electric Reliability Council predicted 260 hours of summ= er blackouts.=20 The reasons for the debunking of those seemingly overblown predictions of d= isaster vary from conservation to mild weather and brand new power generati= ng capacity.=20 Several power plants also returned to service after being closed much of la= st winter and spring for repairs or "routine maintenance."=20 Both state and consumer groups maintain that many of those closures were de= liberate attempts to drive up the price of power.=20 California Attorney General Bill Lockyer, a Democrat with gubernatorial asp= irations, is currently investigating the possibility that a criminal conspi= racy produced the shutdowns.=20 Whether the massive winter and spring price boosts were criminal or merely = driven by market forces, the Federal Energy Regulatory Commission has indic= ated it may approve as much as $4 billion in rebates to California for over= charges.=20 Democratic California Gov. Gray Davis says he will sue unless the rebate am= ount is much, much higher.=20 Meanwhile, wholesale power prices are down more than two-thirds from winter= , averaging $67.42 per megawatt-hour over the last month, compared with a r= ange of $200 to $400 per megawatt-hour in February and March.=20 Most analysts, however, point to the weather and consumer conservation as k= ey factors that helped avoid blackouts altogether.=20 In June, Californians consumed 12.4 percent less electricity than one year = earlier.=20 The reduction in use was 5.2 percent for July, as the weather in some parts= of the state heated up a bit and many air conditioners started to run.=20 During peak hours, when shortages are most likely, usage was down 14.1 perc= ent in June and 10.7 percent in July.=20 Consumers trimmed between 1,000 and 3,000 megawatts of usage during the dai= ly peak hours from 4 p.m. to 6 p.m. - enough to power between 1 million and= 3 million homes.=20 "Without the conservation, there would have been a major problem," said Gre= g Fishman, an official of the Independent System Operator.=20 And no one here is saying the danger of blackouts is completely gone.=20 "We're not out of the woods yet," said Mr. Davis as he cut a ribbon to open= a "peaker" power plant near Palm Springs two weeks ago.=20 "We face our toughest test in early September when temperatures should hit = three digits on a regular basis in many places. But this much we do know: C= alifornians everywhere - from the workers working day and night to build ne= w plants to the families waiting to do laundry after 7 p.m. - all of them a= re exceeding expectations and meeting this energy challenge."=20 Mother Nature has helped considerably, especially in June and July.=20 Cooler-than-expected temperatures in Oregon and Washington state made more = power than expected available from the dams of the federal Bonneville Power= Administration along the Columbia River.=20 "Overall, it seems like most of the summer has been a little on the low-tem= perature side," said Dan Atkin, a National Weather Service meteorologist st= ationed in San Diego.=20 But no one in government or the power industry is ready to say the crisis i= s over.=20 "We certainly aren't ready to stand down the bombers yet," said Stephanie D= onovan, a spokeswoman for the San Diego Gas & Electric Co.=20 But, as Mr. Atkin noted, "We didn't get $3-a-gallon gasoline, either. Now y= ou see how difficult forecasting is."=20 Public Power Utilities' Outlook Stable: Moody's 09/04/2001=20 Capital Markets Report=20 (Copyright (c) 2001, Dow Jones & Company, Inc.)=20 New York, September 04, 2001 -- The credit outlook for public power electri= c utilities remains, and will likely continue to be, stable even as the ele= ctric industry restructuring evolves into greater market competition and de= spite deregulation's failure in California , Moody's says in a soon-to-be r= eleased report.=20 "Moody's believes most public power utilities have used the past several ye= ars well to cut costs and to better position themselves to ensure that cust= omers are satisfied and that the utility's financial condition remains soun= d," says analyst Dan Aschenbach, author of the Special Comment, which conta= ins ratings and outlooks for 72 utilities whose debt totals more than $73 b= illion.=20 Armed with the advantage of local regulation and governance, public power u= tilities--even those in California --have derived operational strength from= retaining ownership of electricity generation and maintaining long-term fi= xed contracts and strong rate flexibility.=20 Challenges the utilities face include continued market volatility, new and = more competitive technology, increasing industry consolidation, environment= al compliance costs (re: nitrogen oxide regulations), and risks of major pl= ant outages or major resource loss related to wholesale energy market volat= ility.=20 The most important challenge involves implementing "a resource strategy tha= t is diverse and flexible enough to meet a more competitive and volatile en= ergy market," says Aschenbach.=20 He adds that Moody's analysis of this challenge and of utility credit stabi= lity during industry restructuring depends, as always, on strong management= , competitive cost structure, and financial flexibility.=20 Overall, evaluation of public power utility credit risks and challenges, sa= ys Aschenbach, should be viewed with the context of continued implementatio= n of the National Energy Act of 1992 by the Federal Energy Regulatory Commi= ssion (FERC), which aims for more open and easier transmission access and m= ore vibrant regional energy markets.=20 Despite deregulation's problems in California and increased state intervent= ion in that market, the nation's wholesale market is already deregulated, t= he analyst says, and the federal focus is on improving transmission grid ef= ficiency.=20 Meanwhile, states have varying timetables for implementing deregulation, fr= om which most public power utilities are exempt (to the ire of investor-own= ed utilities). Moody's predicts that, as a result of deregulation's failure= in California , conflicts will increase between federal deregulation polic= ies and states taking a cautious position of protecting local customers fro= m disruptive and costly power outages.=20 Moody's believes deregulation's negative financial effects, as exemplified = by municipal utilities in Columbus, Ohio, and Springfield, Illinois, in 199= 8, and more recently in Seattle and Tacoma, Washington, "will be repeated e= lsewhere as the more competitive market evolves and some public power utili= ties are caught in unpredictable marketplace conditions," says Aschenbach.= =20 In addition, utilities may face significant competitive pressures--even wit= hout federal legislation--from increased levels of investor-owned utility c= onsolidation and market power in both electricity generation and transmissi= on.=20 And then there's the uncertainty regarding the competitiveness-affecting is= sue of private-use restrictions on tax-exempt bonds municipal utilities use= to raise funds. These federal restrictions, whose relaxation investor-owne= d utilities strongly oppose, limit the amount of bond proceeds that can ben= efit private-end power users.=20 Finally, public power electric utilities face proposals in Congress seeking= their regulation by FERC. Says Aschenbach: "The loss of the flexibility in= remaining exempt from any restrictive regulatory order would be disruptive= to public power utilities."=20 Preview / WEEK OF SEPT. 3-SEPT. 9 Bill to Rescue Edison Is Set for Review 09/03/2001=20 Los Angeles Times=20 Home Edition=20 Page C-2=20 Copyright 2001 / The Times Mirror Company=20 A bill to rescue Edison International's utility from bankruptcy is set to b= e considered Tuesday by a California Assembly fiscal committee, which postp= oned its review of the plan late last week.=20 The Assembly Appropriations Committee adjourned for the three-day weekend w= ithout voting on the bill because of confusion over 11 amendments being con= sidered. The committee members didn't receive analysis of some amendments b= efore the start of the hearing.=20 Southern California Edison, the state's second-largest electric utility, ne= eds the measure to help pay off $3.5 billion in debt accumulated under the = state deregulation law, which froze consumer power rates while allowing who= lesale costs to rise.=20 Under the bill, the utility would be allowed to sell as much as $2.9 billio= n in bonds backed by utility fees paid by an estimated 180,000 business cus= tomers.=20 The state would have a five-year option to buy the utility's transmission l= ines at twice book value, or about $2.4 billion.=20 The appropriations committee has to vote before the full Assembly can consi= der the plan. If approved by the Assembly, the plan must be merged with a s= eparate bill passed by the state Senate last month.=20 Idea of Edison Bankruptcy Gains Currency Utilities: With PG&E as an example= , consumer and business groups are beginning to view reorganization as a pa= latable option to a state rescue plan. JERRY HIRSCH 09/02/2001=20 Los Angeles Times=20 Home Edition=20 Page C-1=20 Copyright 2001 / The Times Mirror Company=20 As state lawmakers enter what looks to be the final round of debate on a re= scue plan for insolvent Southern California Edison Co., consumer advocates = and even some business groups are asking whether the utility's 4.3 million = customers might be better off if SCE filed for bankruptcy.=20 Support for a legislative deal for SCE, which is backed by Gov. Gray Davis = and the utility, is difficult to gauge, in part because the April bankruptc= y filing of California's largest utility--Pacific Gas & Electric Co.--has p= roved less disruptive to customers than first thought.=20 Many lawmakers, analysts and others believe Bankruptcy Court might be a bet= ter forum for SCE to settle its financial problems than the political arena= .=20 If SCE and its nearly $4 billion in power debt land in Bankruptcy Court, th= e logic goes, the company, its creditors and its lenders probably would hav= e to make more concessions than would ratepayers to return the company to f= iscal health.=20 That would be a far different formula than the rescue plan passed by a key = Assembly committee last week. That plan would require the utility's largest= 180,000 customers--primarily businesses--to pay for as much as $2.9 billio= n in bonds to cover much of SCE's debt through higher rates. SCE would fina= nce or negotiate away the remainder of its debt.=20 Edison International, the utility's Rosemead-based parent company, has spen= t virtually the entire year fighting off bankruptcy, arguing that it could = cost as much as $1 billion in legal and administrative fees and could lead = to employee layoffs and higher rates for customers.=20 To emerge from bankruptcy, the company maintains, it might have to sell som= e of its assets or curtail investment in its electrical grid.=20 The utility sank into insolvency after piling up billions of dollars in ene= rgy-related debt under California's deregulation laws. It was forced to buy= power for more than what it could charge customers when prices spiked over= the last year.=20 The accumulation of similar debt pushed San Francisco-based PG&E to file fo= r protection from creditors in U.S. Bankruptcy Court in April.=20 Southern California Edison has been following a different path, agreeing to= a rescue deal negotiated with Davis. The final version of that plan contin= ues to be debated in the Assembly this week.=20 One reason for the tenuous nature of the deal's support is that PG&E's bank= ruptcy thus far has had no disastrous effects. Another reason is that bankr= uptcy experts say the tab will run into the hundreds of millions of dollars= , not the $1 billion Edison projects for a major utility bankruptcy. And by= not approving an SCE rescue bill, politicians would be able to say that th= ey did not vote in favor of raising electricity rates.=20 "Clearly it is in [ratepayers'] best interests for there to be a Southern C= alifornia Edison bankruptcy," said Kenneth Klee, a bankruptcy expert at UCL= A law school. "The advantage of bankruptcy is that creditors and Edison wou= ld share in the pain too. That would give ratepayers some cushioning."=20 Even with bankruptcy, Klee said, ratepayers probably would have some exposu= re. "There is no free lunch," he said.=20 Klee's views are shared by consumer advocates, who have mounted a spirited = but so far unsuccessful lobbying campaign against a legislative rescue of E= dison. They argue that a variety of Edison missteps and its acquiescence to= deregulation make it, rather than rate payers, responsible for huge debts.= =20 "Ratepayers are unlikely to be any worse off in a bankruptcy than in an abs= olute bailout of the utility," said Bob Finkelstein, an attorney with the U= tility Reform Network, a consumer advocacy group.=20 "But from what we have seen in the PG&E case, a bankruptcy would probably b= e more fair for ratepayers," Finkelstein said. "So far, the judge has left = rate matters with the Public Utilities Commission."=20 In June, U.S. Bankruptcy Court Judge Dennis Montali denied a Pacific Gas & = Electric challenge of state regulators' authority to set its electricity ra= tes. He said he wanted to avoid "jurisdictional chaos" and added that "the = public interest is better served by deference to the regulatory scheme and = leaving the entire regulatory function to the regulator."=20 But Finkelstein acknowledged that there isn't enough of a track record with= utility bankruptcies to know for sure.=20 "This is all uncharted territory," he said.=20 Indeed, one factor that could make a bankruptcy filing the least attractive= option is an Edison lawsuit against the state that argues that regulatory = law gives it the right to recover from customers what it paid for power und= er federally approved rates. Edison has said it would drop the lawsuit if i= t can work out a legislative settlement.=20 Barring that, the lawsuit could end up costing ratepayers more than they wo= uld pay under a state rescue plan, said Allan Zaramberg, president of the C= alifornia Chamber of Commerce, who supports the Assembly bill.=20 Legal experts are divided over whether Edison would win its case.=20 The version of the rescue bill that the Assembly Committee on Energy Costs = and Availability approved Wednesday night would allow the utility to issue = ratepayer-supported bonds to pay most of its debt, but says it must find ot= her ways to deal with the nearly $1 billion it owes independent power produ= cers.=20 "Bankruptcy is better than the political football game that is being played= now," said Gary Ackerman, executive director of the Western Power Assn., a= Menlo Park, Calif., trade group that represents many of the large power pr= oducers and traders to which SCE is in debt and which would be barred from = a share of the bond money under the current plan. "It brings order to an ot= herwise chaotic process."=20 Bankruptcy also is where the utility is likely to wind up regardless of whe= ther the Legislature passes the rescue plan, said Benjamin Zycher, of the S= an Francisco-based Pacific Research Institute.=20 Lawmakers have left the big power producers out of the rescue bill because = the state has accused the independent generators of price gouging. The prob= lem, Zycher said, is that those companies still have claims. If they don't = get their money, they could push SCE into involuntary bankruptcy by pressin= g their claims in federal court.=20 The downside to such a tactic, Ackerman said, is that bankruptcy proceeding= s take time and cost money. Moreover, he said, he understands that members = of his trade group could end up collecting less than 100% of what they are = owed by Edison.=20 Others say any advantages of a bankruptcy are outweighed by unique problems= that would arise from putting the state's second-largest electric utility = through the process.=20 "I don't think it is clear-cut," said state Sen. Debra Bowen (D-Marina del = Rey), who chairs the Senate Energy, Utilities and Communications Committee.= "I think it is better to avoid a bankruptcy, but it also wouldn't be the e= nd of the world either."=20 Bowen sees a multitude of unknown outcomes as the biggest risks in a bankru= ptcy. A judge who tries aggressively to protect creditors might attempt to = impose rate increases. Such a move could be supported by the utility, which= would see its debt reduced through the rates customers pay, Bowen said.=20 A bankruptcy also could sever the interests of the utility from the state's= policy agenda, she said.=20 PG&E has become a wild card in the state's policymaking on energy, and many= lawmakers are fearful that Edison would be too if it took the bankruptcy r= oute. Since filing for bankruptcy, PG&E has raised objections to rate makin= g and revenue projections by state agencies, which could delay a $12.5-bill= ion bond offering to cover the state government's power purchases on behalf= of the insolvent utilities.=20 Some lawmakers believe that, as the beneficiary of a state rescue, Edison w= ould be more cooperative than the Northern California utility.=20 Though ratepayers might fare better in a bankruptcy in a narrow financial s= ense, Zycher said, damage to the state's image would undermine any financia= l gain.=20 "A world in which government can pass a misguided policy that imposes such = costs on private companies and then leaves it all to Bankruptcy Court to se= ttle out is dangerous to the investment environment in California," he said= .=20 Thomas Walper, an attorney advising Southern California Edison on bankruptc= y issues, said the utility wants to reach an "acceptable legislative soluti= on" that allows it to become solvent so the company has more control over i= ts future and so the state can exit the power business sooner.=20 Though a bankruptcy certainly raises all of these issues, many analysts out= side SCE point to the case of PG&E. To date, they say, the actions of Bankr= uptcy Judge Montali have not disrupted service or been pro-creditor at the = expense of ratepayers.=20 "We have seen it work orderly in the PG&E case," Ackerman said.=20 But the state still is in the early stages of the process, Bowen said. The = real test will come when a judge approves PG&E's still-undetermined plan fo= r reorganization. Then questions about who is responsible for the huge ener= gy debts run up by the utilities will be answered.=20 *=20 Times staff writer Miguel Bustillo in Sacramento contributed to this report Williams files as creditor in PG&E case 09/01/2001=20 Tulsa World=20 FINAL HOME EDITION=20 Page 1=20 (Copyright 2001)=20 Tulsa-based Williams Cos. Inc. filed a claim Friday in U.S. Bankruptcy Cour= t for $591 million in account receivables it says may be due from Pacific G= as & Electric, California's largest electric utility.=20 The reimbursement would be for natural gas sold to Pacific Gas & Electric i= n California through the California Independent System Operator and the Cal= ifornia Power Exchange Corp.=20 Pacific Gas & Electric, a unit of PG&E Corp., filed for Chapter 11 bankrupt= cy protection April 6.=20 Williams officials said the claim -- filed in San Francisco -- reflects the= maximum amount PG&E could owe Williams for the period through April 6. Wil= liams also acknowledged that some material portion of the $591 million clai= m may be found to be the responsibility of Southern California Edison.=20 "The $591 million claim represents our gross receivables through April 6 an= d the amount we are required to file to ensure that the courts have a full = picture of the monies owed to Williams as bankruptcy proceedings filed by P= G&E last April progress," said Steve Malcolm, president of Williams' energy= services unit.=20 "Williams' reported revenues have previously included the estimated effect = of these bankruptcy proceedings and other ongoing credit issues."=20 Williams sold power through the CA ISO and Cal PX; those entities hold the = sales figures that can be attributed to PG&E and SoCal Edison. Consequently= , Williams said it does not know the exact sales amounts made to PG&E.=20 In the claim filed Friday, Williams itemizes power sales to the CA ISO for = $557.65 million and $32.71 million to the Cal PX. One invoice of power sold= directly to PG&E for $747,900 also is included in the claim.=20 "Williams is committed to serving the California power market and continues= to work toward finding equitable solutions to the energy problems facing t= his state," Malcolm said.=20 "Our claim filed today is in accordance with the legal measures Williams mu= st take to ensure our interests are protected."=20 Williams does not believe its credit exposure to the bankruptcy will result= in a material adverse impact on its results of operations or financial con= dition, Malcolm said.=20 USA: Williams files $591 mln claim in PG&E bankruptcy. 08/31/2001=20 Reuters English News Service=20 (C) Reuters Limited 2001.=20 TULSA, Okla., Aug 31 (Reuters) - Diversfied energy company Williams Cos. In= c. said Friday it has filed a proof of claim for $591 million in unpaid acc= ount receivables in the Pacific Gas & Electric bankruptcy case.=20 The company said, however, it does not believe its credit exposure would ha= ve a material adverse impact on its operating results or its financial cond= ition.=20 Williams said the $591 million represented the maximum amount the utility, = a unit of PG&E Corp. , might owe for power sold via the California Independ= ent System Operator and California Power Exchange.=20 It noted some material portion of the total might be owned by another utili= ty Edison International unit Southern California Edison.=20 San Francisco-based Pacific Gas & Electric, California's largest utility wi= th around 13 million customers, filed for Chapter 11 bankruptcy protection = in April. Now Davis Doing Too Much, Energy Critics Say =09By ERIC BAILEY, Times Staff Writer SACRAMENTO -- Faulted early on for responding sluggishly to the energy cris= is, Gov. Gray Davis has reversed course in dramatic fashion, wielding his e= xecutive powers in a way critics now say edges toward imperiousness. In recent months, Davis has used his constitutional authority to issue a sw= eeping series of executive orders: He authorized the state to borrow $5 bil= lion for energy purchases, weakened air pollution standards for power plant= s and bypassed some of government's normal checks and balances. Most recently, he signed an order allowing Pacific Gas & Electric to transf= er a Kern County power plant to another company. The move, Davis said, woul= d let the new owner retool and begin producing power by next summer. But it= also allowed the company to skip review by the Public Utilities Commission= , and suspended a provision of state law. "It's the imperial governor," said Barbara O'Connor, director of Cal State = Sacramento's Institute for the Study of Politics and Media. The Democratic governor has argued that initially he needed to step back an= d study the evolving crisis. Then, once schooled in his options, he was abl= e to take decisive action to keep the lights on. "Extraordinary times demand extraordinary action," said Davis' press secret= ary, Steve Maviglio. The governor's aides point to polls showing that the public believes Davis = is doing a better job than the Legislature of managing the crisis. Surveys = also show him running ahead of the three potential Republican candidates fo= r governor--Secretary of State Bill Jones, former Los Angeles Mayor Richard= Riordan and businessman William Simon. "My guess is most of the voters would rather have him act decisively and no= t get caught up in the stalemate of Sacramento politics," said Bruce Cain, = director of UC Berkeley's Institute of Governmental Studies. "They probably= figure we can all worry about the niceties of representative democracy lat= er on." The energy crisis certainly has presented Davis with his stiffest challenge= . Unlike the earthquakes, insect infestations, fires, droughts and floods t= hat have tested past governors, the power emergency has unfolded like no ot= her. Complex and persistent, it has defied simple solutions because of the innum= erable players scattered across the worlds of government, business and fina= nce, and its multiple layers of interconnected problems. Some Say Davis Doing Too Much Despite a January State of the State speech by Davis that highlighted the c= risis and pledged more than $1 billion to attack it, legislators complained= into the spring that he wasn't doing enough. But now the governor is being= criticized for doing too much, in particular for his moves to slam through= executive orders of extraordinary scope and volume. Since declaring a state of emergency in mid-January, Davis has issued more = than two dozen such orders, terse decrees that allow a governor to bypass t= he more time-consuming legislative process--and to avoid jousting with stat= e lawmakers who may not be of a like mind. This has only happened before in times of life-or-death crisis. The peak for former Gov. Pete Wilson, himself no stranger to using gubernat= orial fiat in a pinch, came when he issued 36 executive orders during 1994,= the year of the catastrophic Northridge earthquake, when the normal rules = were suspended to get Southern California up and running. After the Loma Pr= ieta earthquake in 1989, Gov. George Deukmejian also used his executive pow= ers--albeit to a lesser extent--in bailing out the Bay Area. During his first year in office, Davis signed about a dozen executive order= s, mostly for narrowly focused issues, a world apart from the latest batch,= which have fashioned huge changes in the way California does its power bus= iness. "Executive orders have a role, but not as the policymaking process for our = state," said Sal Russo, a Republican political consultant running Simon's c= ampaign. "It's godlike power," said Tom Hiltachk, a Republican attorney who acknowle= dged that Davis is within his constitutional rights. "But it's supposed to = be exercised only in extreme conditions. And extreme conditions don't last = for six or seven months." Davis' moves have hardly gone unnoticed. Consumer advocates are howling over a Davis plan they say would essentially= hand control of electricity rates to the governor. Anti-tax crusaders say = he has too eagerly embraced the notion that big government--in particular t= he takeover of power-buying for California's beleaguered utilities--is the = solution. Orders' Repercussions Will Last Long Past Crisis Federal energy regulators in Washington are scrutinizing the governor's hol= d over the Independent System Operator, which shepherds the state's power g= rid. The key issue: a move by Davis since late last year to load up the ISO= board with his own appointees. More provocative than the volume of executive orders, however, have been th= e consequences--which will last far beyond the current crisis. As well as authorizing billions for power purchases, the governor greased t= he skids for quicker construction of gas-fired power plants, an action that= frustrated backers of alternative sources such as wind and solar. He relax= ed state environmental reviews and rushed certification for smaller "peaker= " plants designed to meet the surge of demand on hot summer days. Davis cleared existing plants to boost output by up to 50 megawatts without= the usual bureaucratic procedures. Open-meeting rules, traditional review = periods and other statutory checks and balances were suspended in some inst= ances to speed the push to get more megawatts on line. Such actions allowed Davis to jump-start an otherwise tedious process, crun= ching regulatory time down from years to, in some cases, weeks. "Waiting periods, regulatory delays--all those things stood in the way of k= eeping the lights on," said Maviglio, the governor's spokesman. The biggest shift came at the state Department of Water Resources, a previo= usly low-profile agency run by a Davis appointee. The department made its f= irst power purchase in December--unbeknownst to lawmakers at the time--and = in January began buying power for the state's financially hobbled private u= tilities, too broke to do so on their own. Now the Davis administration supports a proposal by the Department of Water= Resources to have the state PUC essentially rubber-stamp any rate increase= s the department deems necessary, excluding consumers from the process. Sev= eral of his other actions have also weakened PUC oversight. Though the administration argues that it makes no sense to have one state a= gency regulate another, consumer advocates fear the arrangement would allow= Water Resources to raise rates whenever needed without adequate public ove= rsight. "It seems the way he prefers to operate, free of public scrutiny," said Dou= g Heller of the Foundation for Taxpayer and Consumer Rights. "It's somethin= g you'd expect only in some tin-pot dictatorship. It's monarchical, not dem= ocratic." Some at the state Energy Commission likewise feel they have seen their powe= r undermined by the executive branch. Robert A. Laurie, appointed to the co= mmission by Wilson, said the independence of his agency has eroded under Da= vis. "The reason we were made a commission in the first place, in 1975, was that= the Legislature wanted independent advice," Laurie said. "In my opinion, o= ur advice is no longer independent but is thoroughly controlled by the exec= utive branch." Legislators Not Rushing to Help Share the Blame Legislative leaders have not exactly rushed to the defense of Davis, who ev= en on the best of occasions has an arm's-length attitude toward state lawma= kers. The damned-if-he-does, damned-if-he-doesn't response Davis is receivi= ng contrasts sharply with the treatment accorded previous governors during = a crisis. Wilson, for instance, was lionized for his rapid executive moves = after the Northridge quake, a groundswell of support that helped the Republ= ican capture a second term in 1994. Democrats, at least, say they understand that Davis is in a fix, and most a= re at least tacitly standing behind his efforts. "Obviously we would have been happy if more of these actions had been done = jointly with the Legislature," said Sen. Byron Sher (D-Stanford), Environme= ntal Quality Committee chairman. "But hindsight is easy and I wouldn't crit= icize him for what he did." State Senate President Pro Tem John Burton, a San Francisco Democrat and lo= ngtime Davis foil, believes the governor is "doing the best he can in a dif= ficult situation. I would not have wanted the buck stopping at my desk." That does not mean, however, that Democratic leaders are enthusiastically s= upporting Davis. Several were irked that the governor refused to share details of key energy= negotiations with top legislative brass, even in private. His secrecy has extended beyond energy matters. Davis seemed to some around= the Capitol to be oddly distant during July's drawn-out budget negotiation= s, breaking from tradition by convening only a single session of the so-cal= led Big Five legislative leaders. Administration officials counter that the= governor was on the phone repeatedly with lawmakers to round up the needed= votes. When the governor talked of ordering the Legislature to stay in Sacramento = through its summer recess to address a bail-out plan for troubled Southern = California Edison, irritated lawmakers ignored the threat and went home. "People skills are not Gray's strong suit," said Cal State Sacramento's O'C= onnor. "It's an omnipotent, 'I'm smarter than you' style." If Davis' use of executive orders has riled some, concern remains in some q= uarters about what he might yet do. Lew Uhler, president of the Sacramento-based National Tax Limitation Commit= tee, suggested that Davis needs to back away from wielding his executive po= wers, particularly now that the state seems to be skirting a power meltdown= . "It's all part of his worldview: that we're all vassals of the state," Uhle= r said. Oddly enough, Davis also comes under criticism from those who believe he fa= iled to wield his executive powers forcefully enough. Peter Navarro, a UC Irvine economist, argued that the governor should have = used eminent domain to seize power plants in an effort to bring prices into= line. Instead, Davis has deployed mostly verbal weaponry against power gen= erators. Despite his rhetoric, generators negotiated what critics contend a= re pricey long-term power deals from the administration. Davis is trying to renegotiate the contracts. He has also asked federal ene= rgy regulators to force generators to refund $8.9 billion for what he conte= nds was gouging during the past year. But the prospects on those fronts are= mixed. "Gray Davis used the considerable powers of the executive branch to make al= l the wrong moves," Navarro said. Lights Still On, but Glow Could Dim Later Davis defenders believe the governor has turned the corner on the energy cr= isis, at least in part because he took advantage of his emergency powers. H= e has also been lucky: Mild weather has helped the state avoid summertime b= lackouts. Media attention has begun drifting to other events. "Believe me, we didn't want to be in this business of purchasing energy," s= aid Maviglio, Davis' spokesman. "We only did it on an emergency basis to ke= ep the lights on." Yet Davis' use of executive powers to help defuse the energy crisis could h= ave negative political repercussions if the circumstances escalate again, a= ccording to UC Berkeley's Cain. "Some of the things that do go sour," he said, "will be more easily pinned = on him."=20 ---=20 Times staff writers Dan Morain and Nancy Vogel contributed to this story.= =20 Calif Consumer Group Has 30K Signatures Vs Edison Rescue=20 LOS ANGELES (Dow Jones)--A California consumer group will present Gov. Gray= Davis Tuesday with more than 30,000 signatures on a petition protesting a = rescue deal for insolvent utility Southern California Edison, according to = a news release.=20 In recent weeks the Foundation for Taxpayer and Consumer Rights has stepped= up efforts to protest legislation that would allow the Edison Internationa= l unit to issue $2.9 billion in bonds backed by business customers to pay = part of its $3.9 billion in debt. The bill will be heard by the Assembly Ap= propriations Committee Tuesday. The Legislature adjourns Sept. 14.=20 The foundation has said the bill will result in rate increases beyond two t= hat were already instituted this year, and has vowed to sponsor a 2002 ball= ot measure to overturn an Edison bill if it passes.=20 "Governor Davis and Legislators can protect ratepayers over the next two we= eks or face a ratepayer revolt for the next 15 months," FTCR Organizing Dir= ector Carmen Balber said. "The message of this petition is clear: we won't = pay for the failure of the utilities' deregulation scheme."=20 -By Jessica Berthold; Dow Jones Newswires; 323-658-3872; jessica.berthold@d= owjones.com =20 Eleventh Hour Chimes For California's Edison Rescue Deal=20 By Jason Leopold and Andrew Dowell=20 Of DOW JONES NEWSWIRES=20 (This article was originally published Friday.)=20 SACRAMENTO (Dow Jones)--Even a soap opera has to end sometime.=20 For Edison International utility Southern California Edison, that time cou= ld be Sept. 14, when the state Legislature adjourns for the year.=20 After more than seven months of haggling and missed deadlines, there is wid= espread agreement that lawmakers have just two more weeks to craft a state-= sponsored rescue for the utility. If legislation isn't enacted by that date= , it never will be, key lawmakers and Gov. Gray Davis said. And if that hap= pens, Southern California Edison will likely join PG&E Corp utility Pacific= Gas & Electric in bankruptcy court.=20 "This deadline is real," Davis spokesman Steve Maviglio said. "Every day we= wait is one step closer to bankruptcy."=20 At issue is a rescue plan that could come up for a vote on the Assembly flo= or as early as Tuesday. The plan has already been approved by the Assembly = Committee on Energy Costs and Availability, and an earlier version was appr= oved by the Senate.=20 The key details of the plan were first agreed to in principle in February a= nd then formalized in a memorandum of understanding between Southern Califo= rnia Edison and the state on April 9.=20 In essence, the state would help the utility raise funds to recover some of= the losses it sustained buying wholesale power at prices far higher than i= t could collect from customers, taking in exchange a claim on the utility's= transmission assets.=20 As currently conceived, the plan would allow the utility to sell $2.9 billi= on in bonds that would be repaid by medium and large businesses. In exchang= e, the state would hold a five-year option to purchase the company's power = lines for $2.4 billion, or twice their book value.=20 Rescue Plan Uncertain=20 Lawmakers and the utility say the bill still has a long way to go. Senate E= nergy Committee Chairwoman Debra Bowen, D-Redondo Beach, when asked if the = Senate would support the bill as amended by the Assembly, had this to say:= =20 "At this point, I think people may be better off buying a Power Ball ticket= ," she said. "There's still a long way to go before it gets to the Senate."= =20 Even if the plan clears the Legislature, it will likely have to get by the = voters as well. Consumer groups, which want utility shareholders to foot th= e bill, are preparing a ballot initiative to overturn whatever lawmakers ap= prove.=20 If lawmakers don't come to an agreement, the governor could extend the spec= ial session, but Maviglio said Davis won't take that step.=20 Southern California Edison needs the package so it can deal with its credit= ors, who have been waiting since the utility first defaulted on power bills= and debt-service obligations in January in an effort to conserve cash.=20 As of July 31, the utility had $3.3 billion in unpaid and overdue obligatio= ns, including $878 million owed to power suppliers and $931 million in debt= payments.=20 Southern California Edison also owes $1.2 billion to small power generators= known as qualifying facilities. Some of those generators had threatened ea= rlier this summer to pull the utility into bankruptcy.=20 The utility has worked out a schedule to repay $900 million in past-due QF = bills. The QFs were paid 10% of what they're owed in June, but the remainin= g payments hinge on the rescue package.=20 Creditors will likely lose faith in a negotiated solution if lawmakers don'= t act by Sept. 14, said Richard Cortright, a director at Standard & Poor's.= =20 "We could see another bankruptcy here," Cortright said. "We really are at t= he precipice."=20 An Opening On Bankruptcy=20 The plan isn't necessarily a cure-all. As reported, ratings agencies have s= aid excluding large power suppliers from being compensated under the legisl= ation, which now appears to be the price of passage, could delay the recove= ry of Southern California Edison's credit ratings or even provoke creditors= to push the utility into bankruptcy.=20 Pacific Gas & Electric, frustrated by the political and regulatory process,= scrapped talks on its own rescue package in April and put itself in the ha= nds of the U.S. Bankruptcy Court.=20 Southern California Edison, on the other hand, has long maintained it won't= file for bankruptcy - at least until recently. Last week, Edison said for = the first time that the company may voluntarily seek bankruptcy protection = if a deal isn't reached.=20 "We would not foreclose on all of our options," Brian Bennett, Edison Inter= national vice president of external affairs, said last week.=20 If Southern California Edison followed Pacific Gas & Electric, three-quarte= rs of the state's electricity consumers would be served by bankrupt utiliti= es. Small power suppliers could also be pulled down, threatening the state'= s power supply.=20 To be sure, this isn't the first time Edison and others have said deadlines= were serious. The most recent to elapse was Aug. 15. According to the Apri= l MOU, failure by the Legislature to act by that date would give Edison or = the state the right to pull out of the agreement. Neither did.=20 If lawmakers again fail to act, Southern California Edison could return to = the federal courts, where it had pursued a case based on the so-called file= d rate doctrine, a set of precedents holding that utilities are entitled to= recover costs incurred serving their customers.=20 If Edison were to win the case - and legal experts consider the principle s= olid - it could recover its losses without going through Bankruptcy Court.= =20 Some say having a real deadline could stiffen resolve to get a deal done.= =20 "Some people say negotiations don't come together until there's a deadline,= " said Steve Fetter, managing director of the global power group at Fitch. = "We're at that point."=20 -By Jason Leopold, Dow Jones Newswires; 323-658-3874;=20 Fitch Rates California $5.7B RANs F1+=20 =09=09=09=09 Fitch-NY-September 4, 2001: Fitch rates the State of California's $5.7 bill= ion 2001-02 revenue anticipation notes (RANs)`F1+'. The notes, expected Sep= t. 13 through negotiation with a syndicate led by Lehman Brothers, will be = dated the date of delivery and will be due on June 28, 2002. The issue will= include fixed-rate notes and index notes; the fixed-rate notes will not be= callable and the index notes will be callable to the extent specified by t= he state treasurer at the time of sale.=20 The notes are not general obligations of California.=20 They are secured by unapplied moneys in the general fund, including transfe= rs and internal borrowings as permitted by law, subject to prior use for sc= hools and higher education, debt service on general obligations and commerc= ial paper and reimbursement of advances to the general fund from special fu= nds as required by law.=20 The notes are being issued to provide liquidity for the general fund. While= California's financial operations have been very successful in the past fe= w years, with revenues far in excess of estimates, the general fund has thi= s year advanced $6.1 billion for the purchase of electric power pursuant to= the state program administered by the Department of Water Resources Reimb= ursement is anticipated from the proceeds of power revenue bonds to be issu= ed by DWR, but is not now expected until November. In addition to this drai= n, revenues for 2001-02 were revised downward in May by some $4.7 billion a= nd expenditures for the year will be in excess of revenues.=20 The notes are well secured. With the power purchase reimbursement received = (expected in November), the notes will be covered 2.6 times (x) by ending b= alance and borrowable resources. Should the reimbursement be delayed beyond= June 30, 2002, borrowable resources would cover note principal 1.5x. With = reimbursement, ending balance and borrowable funds would be a generous 11% = of estimated receipts and, without, a much narrower 3.7%. The notes are a m= oderate 7% of cash flow, or 8% without the power purchase reimbursement. At= June 30, 2002, with reimbursement, the general fund cash balance would be = $1.1 billion, held in the special fund for economic uncertainties and borro= wable funds would hold $8 billion; without, the borrowable funds would amou= nt to $2.8 billion.=20 This indicates that note repayment could be met if reimbursement is not rec= eived but it would leave the state with a general fund deficit and a steep = reduction in the balances of other funds.=20 Economic assumptions appear reasonable, with employment dropping from more = than 3% growth to 2.3% in 2001 and 1.7% in 2002 and personal income at 2% a= nd 5.6%, respectively. Revenues for this year were lowered in May and perso= nal income taxes are expected to yield 6% less than last year and sales tax= es to increase only 2.3% although the rate will automatically rise by $0.00= 25 in January. Risks to the forecast include the difficulty in predicting t= he volatile capital gains, bonus and options portion of the income tax and = uncertainty over the trend of the economy. California has been outperformin= g the nation but in July, employment rose only 1.6%, the lowest rate since = October 1994. Yet the first month's revenues, in July, were 4.7% over the e= stimates, with the income tax ahead by 5.5% and the sales tax, 5.2%. Bank a= nd corporation taxes remain weak.=20 Dan Walters: State's infrastructure crisis grows, but no one seems to have = a plan (Published Sept. 4, 2001)=20 If the true out-of-pocket costs of California's energy fiasco borne by rate= payers, taxpayers, creditors and utility stockholders were to be totaled, t= he number could easily surpass $100 billion. And by happenstance, that's ab= out what experts say California needs to spend on critical infrastructure i= mprovements, such as new and remodeled schools, waterworks and transportati= on systems, over the next decade.=20 The money wasted on the energy crisis is gone; it remains only for politici= ans, including those who created or exacerbated the debacle, to decide who = gets stuck with the bill. But as they pick at the carcass of the energy cri= sis, politicians also confront the harsh reality that the state's ever-grow= ing population and rapidly changing economy are continuing to create pressu= res for infrastructure investment. And it's clear that Gov. Gray Davis, leg= islators and others charged with resolving California's infrastructure cris= is don't have a plan to do it.=20 With just two weeks remaining in the 2001 legislative session, lawmakers ha= ve barely started on fashioning bond issues to be placed before voters next= year. The Legislature's own budget office is renewing its perennial sugges= tion that the governor and lawmakers devise a comprehensive, multiyear capi= tal improvement program rather than do what they usually do: slap together = a package of bond issues at the last moment with numbers plucked from thin = air. But while politicians pay lip service to such a rational and businessl= ike approach, they're not likely to do it.=20 A two-house conference committee was convened the other day to begin workin= g on the single biggest piece of the bond package, one that would finance s= orely needed elementary and high schools and colleges, not only new buildin= gs but repairs and upgrades to old ones.=20 Funds from a $9.2 billion school bond approved by voters in 1998 have been = spent, and a coalition of educators says $27 billion more is needed. The Le= gislature's budget office says the state could issue up to $30 billion in a= dditional general obligation bonds for all purposes, including schools, if = the borrowings were spaced out to avoid overloading the bond market.=20 But how big a bond package should be placed before voters is just one quest= ion to be answered in the next couple of weeks. Legislators must also decid= e how the proceeds are to be divided among various educational levels, and = they must resolve a very nasty squabble over allocation of K-12 money.=20 For years, California parceled out school bond money on a more-or-less firs= t-come, first-served basis. Districts that put together local financing and= specific construction plans were given priority. But those first in line t= ended to be affluent suburban districts, while big urban districts such as = Los Angeles Unified dawdled. A lawsuit was filed last year to overturn the = state allocation process, and the state agreed to change its method to one = funneling more money to the urban schools. That, in turn, has created a pol= itical backlash among legislators from rural and suburban districts whose p= rojects have suddenly been pushed back.=20 Publicly, legislators on the conference committee say they're committed to = helping every district build and maintain safe, uncrowded and attractive sc= hools for every one of California's nearly 6 million K-12 students. But the= y know that not every need can be satisfied, and by deciding how big a bond= issue is to be offered and settling on how the money is to be divvied, the= y'll be engaging in a form of rationing.=20 In that sense, the school bond wrangle is a metaphor for California's large= r infrastructure crisis. There won't be enough to meet every demand. Not ev= ery car can be driven on the roadways simultaneously, not every student can= have a seat in a good classroom, and not everyone's thirst for water can b= e satisfied.=20 The politics of rationing -- who gets what and at what cost -- will dominat= e the Capitol for years to come, even if the r-word is never uttered public= ly. And that $100 billion blown on the energy crisis would have come in ver= y handy right about now. State's Long term Power Contracts Could be too High all the way to 2010 By Ed Mendel September 3, 2001 SACRAMENTO -- One of the unintended legaci= es of the failed electricity deregulation plan, and the crisis it spawned, = may force the state to pay above-market prices for power for the rest of th= e decade. The dozens of long-term power contracts signed by the state earl= ier this year, as it desperately sought to reduce soaring prices, will be p= robed by a committee after the Legislature adjourns later this month. "I t= hink it is important we discern whether there are opportunities for reshapi= ng some of those contracts in the future," said Assemblyman Fred Keeley, D-= Boulder Creek, chairman of the Joint Legislative Audit Committee. The plan= pursued by the administration of Gov. Gray Davis to tame soaring power pri= ces on the spot market offered generators a deal: Lower prices now in excha= nge for prices likely to be a little above market in the future. When powe= r prices fell in June, the administration declared that the plan had worked= . The spot market, shrunk by the increasing amount of power obtained throug= h contracts, is now said to tilt toward buyers rather than sellers. But ir= onically, as prices on the spot market fell, they also raised questions abo= ut whether the contracts are too much of a good thing, both in price and qu= antity. The spot market has already fallen below contract prices at times = this year. In the initial administration forecast in April, the long-term = contracts were expected to be below average non-contracted prices through 2= 010. Now lower spot-market prices have reversed the forecast. An update in= July by the same administration consultants, Navigant Consulting/Montague = DeRose, expects the average price of power on the spot market to be well be= low the average contracted price from 2003 through 2010. As for the volume= under contract, the forecast is that the amount of power that the state mu= st buy on the spot market will shrink and nearly disappear in 2004, before = beginning to grow again. The state, with 55 contracts worth roughly $45 bi= llion, has been forced to sell some surplus power at a loss. Experts say a = surplus is not unusual when power buyers make large purchases. The large v= olume of power under contract also creates other problems. It limits the gr= owth of power from clean, renewable sources -- wind, solar, and geothermal = -- that are not prone to price spikes like natural gas. Businesses that wa= nt to shop around for cheaper power, which was the point of deregulation, m= ay be forced to stay in the state system to prevent the contract payments f= rom falling too heavily on residential consumers. Still, Keeley faces an u= phill battle as his committee looks at reopening the contracts. The governo= r's top energy adviser, S. David Freeman, defends the contracts as "insuran= ce" against runaway spot-market prices. And the two California generators,= Calpine and Sempra, who hold the biggest state contracts and say they inte= nd to be good citizens, vigorously defend their contracts as being good dea= ls for the state. A Calpine senior vice president, Jim Macias, said its fo= ur contracts to provide 2,500 megawatts over 10 years are at very competiti= ve rates, an average of $60 per megawatt hour. The president of Sempra Ene= rgy Resources, Michael Niggli, said his firm has been buying power, sometim= es at a loss, to meet its contract. When new plants come on line in 2003, h= e said, Sempra's rates will vary with the price of natural gas and be among= the lowest. =09