Subject: California Update 8/28/2001
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Date: Tue, 28 Aug 2001 11:30:19 -0700 (PDT)

Please feel free to address any California or western power questions/comments to G. Britt Whitman at ex: 54014 or Kristin Walsh at ex: 39510.

EXECUTIVE SUMMARY
?     Legislative Maneuvering Towards a Bail-Out Plan 

MOU Developments
The Assembly Energy Costs and Availability Committee held hearings yesterday on the SoCal bailout plan, AB 82.  The chairman of the committee, Rod Wright, has agreed with Hertzberg and Davis to move something out of the committee, possibly by mid-week.  Much of the Assembly's efforts to move along a comprehensive plan have been encumbered by the introduction of over 50 amendments.  Additionally, demonstrations by a group of farmers and resort owners opposing the conservation easement provision included in the bill may also slow the process.

Three Central Valley Democrats (Reyes, Flores and Canciamilla) on the Assembly Committee on Energy Costs and Availability will likely be paying close attention to the demonstrations against the conservation easements, as farmers are significant in their districts.  All three legislators face reelection.  Reyes has already signaled that, even though she voted for the bailout last time, she is disinclining to do so again.  These three Democrats may impede the progress of the bailout.  There are strong indications that the plan will not come to a vote until it has the necessary votes to pass.  At this point there still appears to be a lack of consensus on the Democratic side.

Another substantive amendment to the current plan has been a call by SoCal for "fair market value" of its transmission assets, rather than book value.  This value, of course, would have to be estimated and essentially means that even more money would have to go toward the bailout.  While Committee Chairman Wright would not oppose this idea, it will likely be hard for many of his colleagues to swallow, particularly on the Senate side.

Once the amendments are disposed of and the bailout plan clears the Assembly Energy Costs and Availability Committee, it will then go to Assembly Appropriations.  The chair of this committee, Carol Migden, is friendly with both Hertzberg and Governor Davis, so the plan appears unlikely to receive significant opposition in her committee.  It will then go to the Assembly floor for a vote.  Since it is likely some sort of bailout plan will pass the Assembly, it likely will fall to the Senate to decide ultimately if a SoCal bailout makes it to the governor or not.  Therefore, it becomes important to examine what deals might be made between Burton and Davis in order to get a bailout through the Senate.  For example, Burton wants a change in the workers' compensation laws to increase payouts to workers.  This is a very important issue.  On the one hand, both trial lawyers and the unions support Burton.  On the other hand, he is strongly opposed by the powerful CTMA, the Republicans and pro-business Democrats, including Governor Davis.  In fact, Davis has already vetoed this legislation at least once and has promised to do so again.  It is conceivable, though unlikely, that a deal could be struck whereby Burton would allow a SoCal bailout to pass in exchange for Davis signing workers' compensation reform.  However, if this were to happen, both the bailout and the workers' comp reform together would be an enormous burden on California businesses at a time when these businesses are not doing well.  This is why a deal on this particular topic appears unlikely at this time.