Subject: California Update#2; 3/23/01
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]
Date: Fri, 23 Mar 2001 19:00:00 -0800 (PST)

?	Davis's transmission deal essentially dead
	As reported early, the primary sticking point in Davis's deal with PG&E was over PG&E's legal obligation to supply California with power, given the state's net short position this summer.  As a result of last night's ruling, the net short position doubles this summer and Davis is not willing to let PG&E out of these responsibilities.  The legislature also recently discovered, in a draft of the transmission deal, that the deal removes the CAPUC's rate setting powers, meaning rate hikes are a strong possibility.  According to sources, the legislature "is in horror" at this discovery and will absolutely not let this happen.

?	Davis becoming very unpopular with the legislature as they realize the term of LT power contracts
	The legislature is also growing increasing more angry at Davis as they realize the LT contracts negotiated with Davis will not fully come into affect until 2004.  Additionally, many legislatures are discovering, as they return home, that they are losing popularity in their districts and are having to face angry constituents.  As a result, Davis's creditability is starting to suffer and he losing support of both Democrats and Republicans. 

?	Davis warns senior Republican leadership not to publicly make waves
	Davis told senior Republican leaders that if they start talking to the press and pointing fingers at Davis and his lack of solid solutions to California's problems, he will "drag both Pete Wilson and the previous administration through the mud" as the original source of the deregulation debacle.

?	Last ditch efforts could be made regarding rate hikes, however doesn't address past debt
	Davis could order rate hikes as a last ditch effort, but this action would not address the undercollection  issue.  There is still a high chance of bankruptcy by either the larger generators, commercial paper holders, and (less now but still very possible) the QFs as time is running out (forbearance period ended March 13).