Message-ID: <23821064.1075851616166.JavaMail.evans@thyme> Date: Tue, 25 Sep 2001 08:46:42 -0700 (PDT) From: jeff.dasovich@enron.com To: michael.tribolet@enron.com, lisa.mellencamp@enron.com, richard.shapiro@enron.com, j..kean@enron.com, susan.mara@enron.com, paul.kaufman@enron.com, karen.denne@enron.com, pr <.palmer@enron.com> Subject: FW: Elec Daily - PG&E's reorganization Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Dasovich, Jeff X-To: Tribolet, Michael , Mellencamp, Lisa , Shapiro, Richard , Kean, Steven J. , Mara, Susan , Kaufman, Paul , Denne, Karen , Palmer, Mark A. (PR) X-cc: X-bcc: X-Folder: \Dasovich, Jeff (Non-Privileged)\Dasovich, Jeff\Sent Items X-Origin: DASOVICH-J X-FileName: Dasovich, Jeff (Non-Privileged).pst -----Original Message----- > Electricity Daily > > Tuesday, September 25, 2001 > > Analysis: PG&E's Brilliant Reorganization > The reorganization plan that PG&E Corp. and Pacific Gas and Electric filed > in U.S. Bankruptcy Court last week (ED, Sept. 21) is brilliant in its > simplicity. It essentially moves as much of the company's hard assets as > possible away from California's notoriously business-averse politicians > and regulators and to the more predictable feds. That step, itself, makes > the businesses creditworthy, because it creates a predictable revenue > stream. > The one element of the business that can't be severed from the > jurisdiction of the rapacious California Public Utilities Commission - the > retail electricity and gas distribution utility - will be so fenced in by > federally-approved wholesale contracts that the CPUC will have no choice > but to pass through costs preordained as just and reasonable or face > certain loss in the courts. In the meantime, PG&E's filed rate case > continues in court, with every likelihood of success, further limiting the > damage that the demented regulators can impose. > PG&E's hydro system is already subject to Federal Energy Regulatory > Commission regulation, although many consumer groups in the state don't > seem to understand that fact. Under the reorganization plan, the Diablo > Canyon nuclear plant would become a wholesale provider with a > FERC-approved tariff. PG&E's pipeline system, historically a "Hinshaw" > pipeline not subject to federal jurisdiction, would become a traditional > interstate system under FERC jurisdiction. > The politicians and regulators quickly recognized what PG&E would do and > have been gnashing their teeth furiously since the announcement. But it > appears there is little they can do other than lament. The plan would not > raise rates, so the court has no reason to consult with the CPUC. And > federal law clearly trumps state law when it comes to protecting > creditors. > The fact that the creditors are lined up behind the reorganization plan is > the worst news the state could hear. According to bankruptcy experts, it > is highly unlikely that the court would reject a plan that the creditors > endorse. Because they get all their money paid, with interest, the > creditors are largely made whole (the largest will have to take some notes > as part of the repayment). > Will the bankruptcy reorganization plan lead Southern California Edison > into bankruptcy? There are two lines of argument on this question, both > valid. One suggests that the plan will lead Gov. Gray Davis and the > backers of his Edison bailout to push harder for quick action, lest Edison > decide it can do better in court than it can in the Legislature. The other > line argues that PG&E's plan will lead Edison's creditors to put the > utility quickly into Chapter 11 involuntarily. > The Reuters news service last week reported that power generators Mirant > Corp. and Reliant Energy are looking for a third creditor to push the > company into involuntary bankruptcy. Sources indicate that the city of > Long Beach may be the third creditor needed to push the state's second > largest utility into bankruptcy > Ted Craver, chief financial officer of Edison International, the utility's > parent, told a conference call to creditors last week that the company > would not voluntarily seek bankruptcy protection and would "vigorously > oppose any involuntary bankruptcy petition." But under bankruptcy law, > according to legal experts, once the creditors file, there is little > Edison could do. > In addition, the unveiling of the PG&E plan last Thursday will embolden > Republicans in the Legislature, and perhaps some Democrats, to put a > rescue package for SCE on hold. The PG&E filing has much to recommend > itself to both Republican and Democratic legislators. It does not raise > retail rates. It does not involve any form of a state "bailout" of the > utility. It provides a clear path for the state to get out of the energy > procurement business. > -- Kennedy Maize > >