Subject: California Update 5/16/01
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Wed, 16 May 2001 09:33:00 -0700 (PDT)

EXECUTIVE SUMMARY
? Of the four &Plan Bs8 introduced recently by California legislature, only 
two proposals appear viable for SoCal, and surprisingly, PG&E.  The others 
either establish vulture funds for when So Cal goes under, or propose new 
ways of funding the transmission line deal.  The California legislature's 
inability to identify an immediate solution has cued the media to limit the 
publicity of the lesser &plan Bs.8
? At this point, SoCal is interested in a making a deal.  Not only are they 
are the on the verge of bankruptcy, but (unlike PG&E) SoCal has also 
significantly exposed its parent company to bankruptcy by not taking the 
necessary steps to protect its assets.  As reported earlier with PG&E, we are 
monitoring all activities surrounding SoCal assets, which could signal 
imminent bankruptcy.

The Infamous &Plan B8
Four hours of debate and the absence of Republican representation on Tuesday 
night led members of the state Assembly's so-called "Plan B" group to decide 
backing only legislation introduced by Assemblymen Dean Florez and Joe 
Nation.  A previous proposal by Senate President Pro Tem John Burton that 
poised the state to purchase SoCal,s transmission lines for $2.76B to service 
debt and left the Ca. PUC to determine SoCal,s unrecovered power costs prior 
to bond issuance, didn't,t win support.  As reported earlier, sources 
indicate that Davis MOU is likely to suffer a similar fate once introduced by 
Senator Polanco later this week. 

? The Florez Plan
Florez,s plan is currently under review in the Assembly Energy Committee.  
The proposal allows PG&E to issue bonds secured by their assets and use the 
revenues to pay creditors.  The state would then assess a tax on the bond 
revenues aimed at servicing PG&E,s debt with the CADWR.  Sources report one 
drawback to the plan is that PG&E bankruptcy Judge Montali would be required 
to authorize any such a transaction respective of other recommendations 
available to the court.  This may not be the most time-efficient course of 
action.  PG&E had shown signs of approval over similar plans in the months 
preceding their bankruptcy.  

? The Nation Plan
Nation,s plan allows SoCal. Ed to sell bonds backed by ratepayer revenues 
generated from state approved rate hikes.  Additionally, the state would hold 
a five-year option on buying the transmissions lines for book value (roughly 
$1.2B), as well as holding to the SoCal concessions previously mentioned in 
Davis' MOU.  The drawback to Nation,s proposal is that SoCal creditors 
(including banks and generators) would have to collectively agree to take 
debt repayment at $0.75 on the dollar.  Sources report that some SoCal 
creditors favor attempts to recoup dollar for dollar in bankruptcy court over 
conceding to a &haircut.8  SoCal. reportedly approves of Nation,s plan 
sticking to the principals outlined in Davis, MOU.