Subject: California Update 2/23/01
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]
Date: Fri, 23 Feb 2001 12:10:00 -0800 (PST)

Please contact Kristin Walsh (x39510) or Robert Johnston (x39934) for additional information.

Summary
Gov. Davis is expected to announce a plan today, however, there have been no breakthrough deals in negotiations that would support a plan.  
Sources report that at least 7 or 8 Democrats have indicated to consumer advocate Harvey Rosenfield that they would join Republicans in blocking any proposed bailout by Governor Davis.  This coalition would be enough to kill any transmission purchase proposal.
The emergency legislative session is closed, after which all current legislation would need to be introduced in a new session.

1. Bankruptcy Outlook
An advisor to MBIA* is attempting to pull other creditors into an informal pre-petition committee.  However, the creditors are finding that their interests are not always the same, and inter-creditor politics are becoming very active at this point.  For instance:

	- BC Hydro is not inclined to take aggressive action, even though they are one of the biggest creditors.  As their power is hydro, they are operating with a huge margin - i.e., they do not owe any other companies for gas used to produce their power.  

	- Reliant, using the "squeaky wheel" theory, took a hard line with the governor and succeeded in extracting a partial payment from DWR in exchange for a 30-day agreement to supply power.  Other creditors have seen this and are thinking along similar lines.

	- The generators and QFs as a whole are not very organized yet.  The QFs are negotiating with the state on reducing the amount they are prepared to get paid for the power they supply, but the negotiations reportedly are not going well, and there is no deal in sight.  Reportedly the state has offered to pay the QFs $.07/kwh, but the QFs want $.09/kwh.

*MBIA is a credit insurer.  In other words, if a company issues revenue bonds, MBIA, for a fee, will reimburse the bondholders for their losses up to a certain level (e.g. the first 10 -15%).  I believe it at one time stood for Municipal Bond Insurers' Association.  They have a AAA rating.

2. Legislative Activity
Once the extraordinary session is closed by the Governor it ends and all bills in that session are dead. They would have to be reintroduced with new bill numbers and run through the process again. If the bills have already been heard once in committee it is probable these bills will be taken up for a vote.  The legislator is having so many hearings on bills this week to try and get as many through before the extraordinary session ends.