Subject: California Update 3/27/01
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]
Date: Tue, 27 Mar 2001 13:06:00 -0800 (PST)

Executive Summary:
?	Undercollet Remains Sticking Point for Utility Creditors (especially QFs), involuntary bankruptcy likely if issue is not addressed in today's CAPUC hearings
?	CAPUC Rate Increase Set at 40%, Pending DWR Power Purchase Details
?	Davis Defends No Rate Increase Position, Distances Himself from CAPUC

QF/Generator undercollect may be an invitation to involuntary bankruptcy
As reported last week, QF has sitting and waiting to hear what the CAPUC has to say, unfortunately it may not be what the QFs want to hear.  The utilities' undercollect, which will not be addressed in today's CAPUC hearings, could very well provide an invitation for QFs and generators to file involuntary bankruptcy against SoCal and PG&E.  Recent rate hikes proposed by the CAPUC specifically dictate that any revenue generated from rate increases cannot be used to pay off utility past debt, leaving the QF with little hope of recovery.  QFs were obviously dismayed by the CAPUC's draft order and if the decision is passed as it currently reads, an involuntary bankruptcy filing is still likely.

CAPUC holds rate increase hearings today
As reported yesterday, Loretta Lynch released the details of the CAPUC's draft rate increase order last night.  There is expected to be a 3 cent/kwh surcharge on power bills or roughly a 40% rate increase.  A portion of this "surcharge" will be given to the DWR to cover its costs and the order concludes that utilities need revenues on a going-forward basis.  Therefore, utilities can only use the revenues for power purchases going forward and are expressly forbidden from using this cash to pay down past debt (ex. QFs).  However, the utilities are ordered to resume payments to the QFs on a going-forward basis.  The net effect of the order is to allow the utilities to operate in case of bankruptcy.

One interesting point in the draft is its decision which calls on the utilities to join  with the state in pursuing a refund on the amount overcharged for power by the generators.  The suggestion is that the utilities take legal action against the generators to recoup funds.  Only the funds recovered from generators can be used to pay down the utilities' past debt.  If the utilities choose this course of action, it would be a very lengthy process.
  
Davis contends with Lynch on CAPUC rate increases.
Davis has thus far refused to support CAPUC's proposed rate increase stating the CAPUC decision making board is an independent body and that he continues to believe that a resolution can be found within the current rate structure.  Sources indicate that he is likely to ask for Lynch's letter of resignation, however, there is no indication she will comply.  Senator Burton, who supports the CAPUC's plan, reportedly will protect Lynch by not allowing her to be impeached (which is the only other way she could be removed by the governor).