Message-ID: <17692198.1075840727893.JavaMail.evans@thyme> Date: Wed, 13 Dec 2000 04:11:00 -0800 (PST) From: carla.hoffman@enron.com To: tim.belden@enron.com, robert.badeer@enron.com, jeff.richter@enron.com, phillip.platter@enron.com, mike.swerzbin@enron.com, diana.scholtes@enron.com, sean.crandall@enron.com, matt.motley@enron.com, mark.guzman@enron.com, tom.alonso@enron.com, mark.fischer@enron.com, jesse.bryson@enron.com, chris.mallory@enron.com Subject: DJ PG&E: Will Keep Borrowing Until Lenders Say 'No More' Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Carla Hoffman X-To: Tim Belden, Robert Badeer, Jeff Richter, Phillip Platter, Mike Swerzbin, Diana Scholtes, Sean Crandall, Matt Motley, Mark Guzman, Tom Alonso, Mark Fischer, Jesse Bryson, Chris Mallory X-cc: X-bcc: X-Folder: \mark guzman 6-28-02\Notes Folders\Notes inbox X-Origin: GUZMAN-M X-FileName: mark guzman 6-28-02.nsf ---------------------- Forwarded by Carla Hoffman/PDX/ECT on 12/13/2000 12:19 PM --------------------------- Enron Capital & Trade Resources Corp. From: "Pergher, Gunther" 12/13/2000 11:10 AM To: undisclosed-recipients:; cc: Subject: DJ PG&E: Will Keep Borrowing Until Lenders Say 'No More' 19:04 GMT 13 December 2000 =DJ PG&E: Will Keep Borrowing Until Lenders Say 'No More' By Mark Golden Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--How long can PG&E Corp. (PCG) continue to buy power at $500 a megawatt-hour and sell it at $54? As long as banks continue to say it can, according to the spokesman for PG&E's regulated utility Pacific Gas & Electric Co. "That decision belongs to the lending institutions. They have to make the decision if lending us money is a prudent investment for them," utility spokesman Ron Low said in an interview late Tuesday. From May through November, the utility spent $4.6 billion more to buy electricity in skyrocketing bulk power markets than it can charge its customers, who have frozen rates. And December purchases so far have been more expensive than those of any previous month. Since the California Independent System operator lifted its $250/MWh price cap over the weekend, the northern California wholesale power market has traded between $450-$1,000/MWh. Such prices are expected to be common this winter. About two-thirds of the $4.6 billion difference was paid by PG&E to outside electricity suppliers. PG&E had to borrow this amount from the credit markets. About one-third of the $4.6 billion was paid into an account for income from power plants that PG&E still owns, funds which the company controls. The California Public Utilities Commission indicated Tuesday that it will authorize the state's utilities to use power plant profits to pay off some of their debts. That CPUC move will be totally inadequate, according to the PG&E and Edison International's (EIX) Southern California Edison. Their request for a customer rate increase was rejected by the CPUC last week. On Tuesday, the PUC proposed an order rejecting the utilities' overall approach to fixing California's power market. The PUC will take a final vote on Dec. 21 on that order, which promises to "continue to monitor the impact on the utilities." For now, PG&E is left to borrow about $750 million a month to fund the electricity losses. "We need the state to begin immediately addressing the issue. There is time to avoid a very serious problem which would affect all of California, but inaction will rapidly result in a collapse of the entire energy system and with it the economy," Low said. Presumably, that means the collapse of Pacific Gas & Electric as well. "That's up to the institutions that are lending us money. The company has a strong financial history, which allows us to go out and borrow money and buy power for our customers. It can't go on forever," said Low. Almost all of the utility's debt is recourse debt of the parent company, PG&E Corp. The corporation spokesman, Greg Pruett, said that for now the parent company is actively engaged in helping the utility fund the power purchases. '"We review this on a daily basis, but it can't go on forever. The two-minute warning has sounded and there are seconds remaining in the game," Pruett said. "This debt - $4.6 billion - is more than half of the market capitalization of PG&E Corp. That's huge and it's got to stop," Pruett said. When asked if California Governor Gray Davis is willing to let the state's utilities go bankrupt, Davis' spokesman said Wednesday that "the governor doesn't want to comment until he finds out more about the situation." Enron Corp. (ENE), as one of the big beneficiaries of the higher prices for bulk power supplies, has some concern about the credit strain, "but I can't imagine the state letting the utilities go into bankruptcy," Enron Chairman Kenneth Lay said Wednesday. "The utilities will have a difficult time raising the funds unless state gives a guarantee," Lay said. -By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com (END) Dow Jones Newswires 13-12-00 1904GMT Copyright (c) 2000, Dow Jones & Company Inc G_nther A. Pergher Senior Analyst Dow Jones & Company Inc. Tel. 609.520.7067 Fax. 609.452.3531 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer.