Subject: Re: Davis Wants Generators to Accept Less Than Owed (Update2)
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Wed, 28 Feb 2001 10:43:00 -0800 (PST)

FYI.  Looks like what we suspected is about to launch, i.e., an orchestrated 
effort by Davis to go after the suppliers.  Just found out the following from 
Sue Mara, who attended the ISO board meeting today:

The ISO is scheduled to release a "report" today claiming that suppliers are 
price gouging.
The California AG has subpoena-ed generator-members of the WPTF---very 
extensive questions asking for just about everything under the sun.

Likely that we can expect a loud call for regional price caps very soon.

Best,
Jeff

	Karen Denne
	02/28/2001 06:25 PM
		 
		 To: Jeff Dasovich/NA/Enron@Enron, James D Steffes/NA/Enron@Enron, Richard 
Shapiro/NA/Enron@Enron, Mark Palmer/Corp/Enron@ENRON, John 
Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steven J Kean/NA/Enron@Enron, 
[email-masked], [email-masked], 
[email-masked]
		 cc: 
		 Subject: Davis Wants Generators to Accept Less Than Owed (Update2)

Davis Wants Generators to Accept Less Than Owed (Update2)
2/28/1 18:56 (New York)

Davis Wants Generators to Accept Less Than Owed (Update2)

     (Adds names of California generators in fifth paragraph, and
Reliant comment in sixth.)

     New York, Feb. 28 (Bloomberg) -- California Governor Gray
Davis said he intends to ask power generators to accept partial
payment for power sold to the state's cash-strapped utilities this
summer and winter, Wall Street analysts who attended a closed-door
meeting with the governor said.
     ``It looks like the people he wants sharing the pain are the
companies generating power sold to utilities,'' said Kevin Boone,
a bond analyst with Bear, Stearns & Co. who attended the meeting
in New York. ``He wants to force them to take cents on the dollar.
That seems to be what his initial proposal will be.''
      PG&E Corp.'s Pacific Gas & Electric, and Edison
International's Southern California Edison, the state's largest
utilities, are near bankruptcy after accumulating more than $12
billion in debt buying power from generators at soaring prices.
Regulators have not let the utilities pass on most of their power-
buying debt to consumers.
     Davis said some generators have approached him with offers to
accept less than full payment, said Michael Worms, a utility
analyst with Gerard Klauer Mattison & Co. Davis spoke to about 35
analysts from Wall Street and energy-research firms in New York in
a meeting that was criticized by investors and analysts who were
not allowed to attend.

                        No Names Mentioned

    Davis didn't specify which companies came to him with partial-
payment proposals, analysts said. Duke Energy Corp., Calpine
Corp., Willams Cos., Dynegy Inc. and Reliant Energy Inc. are among
the biggest suppliers of electricity to California utilities.
    ``I'm not aware of him talking to anyone at Duke about
forgiveness,'' Duke Energy spokesman Tom Williams said.
      Reliant spokesman Richard Wheatley said Davis's proposal
``doesn't really come as a surprise'' because politicians in
Sacramento, the capital of California, have been discussing the
idea for weeks. Reliant has opposed anything other than full
payment of its debts.
    ``Williams fully expects to be paid the money that is owed
us,'' spokeswoman Paula Hall-Collins said. ``We have worked in
very good faith with the state, selling voluntarily into the
market, negotiating with them for long-term contracts and working
with them to solve the problem.''
      Enron Corp., an energy trader that has set aside unspecified
reserve for possible losses in California, has not been approached
about debt forgiveness, said Karen Denne, a company spokeswoman.
      ``This proposal. . . is news to us,'' and does not address
the immediate problem of electricity shortages in California this
summer, Denne said. Industry analysts say California, which has
already had scattered blackouts this winter, will face more this
summer when power demand surges.

                     Buying the Grid

     Davis said at the meeting that negotiations to buy PG&E
Corp.'s power transmission system may take another 30 days, though
he was optimistic an agreement could be reached within two weeks,
analysts said. He offered few other specifics on the PG&E talks,
said Steve Fetter, group managing director of global power for
Fitch Inc.
     State officials are trying to reach agreement with PG&E and
Edison, as well as with Sempra Energy, to buy their transmission
lines as part of a plan to help them pay debt and borrow money at
low interest rates to avoid bankruptcy. A tentative agreement to
buy Edison's lines for $2.76 billion was reached last week. Talks
with Sempra are continuing.
     The governor said he was optimistic an agreement with PG&E
could be reached in two weeks, but negotiations could drag on
longer, Fetter said.
       ``We are making progress,'' Davis said at a news conference
after the analysts meeting at the Cornell Club on the east side of
Manhattan. ``We are close to a final agreement with (Edison) and
relatively close with Sempra.''
      The governor told analysts he's confident he can get a
utility rescue plan that doesn't require an immediate rate
increase, but Davis did say that rate increases are going to be
needed at some unspecified time in the future, Fetter said.
    Davis said he wasn't sure if he resolved all of analysts'
doubts about California's plans to save its utilities from
bankruptcy.
    ``He's in a hole and he's got a long way to go to get out of
it,'' said Paul Patterson, an analyst with Credit Suisse First
Boston who attended the meeting. ``We still don't have a final
solution in sight.''
     Shares of San Francisco-based PG&E fell 9 cents to $13.96.
Rosemead, California-based Edison shares fell 4 cents to $14.90.
San Diego-based Sempra fell 16 cents to $22.15.

--Mark Johnson and Jonathan Berr in New York (212) 318-2300 or
[email-masked] and [email-masked] with reporting by
Margot Habiby in Dallas and Jim Kennett in Houston/alp