Subject: California Update 6/19/01
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Date: Tue, 19 Jun 2001 17:34:00 -0700 (PDT)

EXECUTIVE SUMMARY
?	Angelides to Announce Bridge Loan Financing
?	US Senate Democrats Go Back & Forth With FERC
?	SDG&E Line Sale Overview
?	California DWR Contracts Add Tension
?	GE Accommodates Western Power Sellers 
?	PG&E Executives Profit Even in Bankruptcy

Angelides to Announce Bridge Loan Financing
As reported on the wires and confirmed by sources, State Treasurer, Angelides will announce a $4.3 B bridge loan today at 2pm PST.  The majority of the loan will be provided by J.P. Morgan Chase and Lehman Brothers.

US Senates Withdraws Price Cap Legislation, Almost 
In response to yesterday's FERC order, the Senate Energy Committee Chairman Bingaman, and California US Senators Feinstein and Boxer have decided to temporarily withdraw legislation aimed at setting wholesale power price caps in western states.  The action displays an effort by lawmakers to acknowledge both Bush's and FERC's meek spirit of cooperativeness and allow some time to determine the Order's effectiveness.  At least one legislator remains unsatisfied as sources report that Sen. Gordon Smith (R-Oregon) plans to author a bill by July that would attempt to extend the one year term on yesterdays FERC order to cover the northwest's power shortages winter 2002.  Acknowledging the seasonal power swap between California and its northern neighbors, Smith views current mitigation plan covering two California summers, and only one northwest winter, as unfair.

SDG& E Line Sale
Through this deal, Sempra and the state assert that San Diego Gas & Electric's $750 M undercollect can be eliminated without a state purchase of SDG&E's transmission assets, which is the only element of the deal that would have to be approved by the legislature.  (This is a key difference between this agreement and the SoCal MOU.)  The other tenets of the deal would only have to be approved by the PUC.  In other words, Sempra claims that it will be able to eliminate SDG&E's undercollect just by dealing with the PUC rather than the legislature.  Sources suggest that this may be in reaction to the failure of the SoCal MOU to move in the legislature.  Sources also indicate that the earlier Trans-Elect offer to purchase SDG&E lines for ($1.8B) considerably less than the States bid only makes the California legislature more leery of approving the SoCal MOU.  MOU attached below.

Davis Kindles new Fire over DWR Contracts
Friday's release of the CADWR power contracts motioned Republicans to begin a new wave of complaints against the governor remarking that the contract information was lacking and data that the public has a right to know had been blacked out.  Assembly Member Dave Cox (Minority Leader) stated that the most troubling items were the clauses that exempt generators from having to pay windfall profit taxes or environmental penalties, and instead these would be paid by taxpayers.  Backlash from the Republicans has been increasing as a new wave of California television commercials peg Davis as the root of  California's energy woes.  

GE Out West
Sources report that there are 3 or 4 GE generator sets (peaker plants) on the market now for $14 - $15 M.  This is because the people who bought these units do not want to go forward and get into the California market because it is "too arbitrary."  Sources report that the sellers of these generator sets made this decision beginning approximately a week ago. Additionally, Sources believe that GE may move to cost-plus-based pricing for sellers of power in order to provide stable financing for generators over the long term, though this would mean less profits than in the past.

PG&E Executives Profit Even in Bankruptcy
As reported on 6-14, sources continue to believe that SoCal executives are closely following the events unfolding in the PG&E bankruptcy case, as mentioned in last Thursday's report "Judge Montali approved large bonuses for PG&E senior management after PG&E's filing made Bryson and other members of his team "reconsider" the merits of bankruptcy."   Today's news reports of Judge Montali's order providing PG&E executive with $17.5 M in bonuses just reiterates the point to Bryson that PG&E executives remain well-paid even in bankruptcy thus suggesting SoCal could do equally well in the event of a filing.   Sources suggest that SoCal's current cash position weighs less heavily in determining a bankruptcy filing than the prospect of asset seizures/liens (however, sources continue to make inquiries as to SoCal's cash flow situation.)