Subject: California Update 9-19-2001
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Date: Wed, 19 Sep 2001 10:16:01 -0700 (PDT)

For questions or comments regarding this report please contact G. Britt Whitman at ex:5-4014 or Kristin Walsh at ex:3-9510.

EXECUTIVE SUMMARY
?	Weekend Developments of the SoCal MOU 
?	SoCal & Creditors Weigh Bankruptcy Options

California Senate Adjourns Without a Bailout Vote
As previously reported (9/14), our prediction of Sen. John Burton discouraging support of the SoCal bailout did, in fact, play-out.  Burton's last minute vote polls indicated that there were only four Senate Democrats favoring the MOU and an in extraordinary move, Burton adjourned the Senate without bothering to let AB 67XX face a floor vote.  The following outline the prevailing factors that led to Burton's decision:

?	Reportedly, in addition to virtually no Republican support, a coalition between at least 7 far left Democrats and pro-business Democrats convinced legislators not to vote on bailout legislation.  

?	At one point Treasurer Angelides pulled Senator Bowen aside and told her that the revenue bonds might sell with direct access after all.  She then accused Angelides of having lied to her about this in originally telling her that a bond sale would not be possible if direct access was included.  

?	Both Governor Davis and Treasurer Angelides appear to have damaged their relationship with the Senate.  Davis stated that he would not sign Burton's legislation due to its ineffectiveness and additionally he would veto Burton's bill separating the revenue streams for bond payment and payments for power.  
 
Given the state of relations in Sacramento, Senators are likely to offer little or no cooperation on a bailout plan if Davis calls another emergency session.  See Burton's response (paraphrased):  "I'm going to be on jury duty, and I'm not going to exercise my right to be excused."  He's also not going to ask people to come back and, as of last Saturday (9/15), most people on the business Democrat and Republican side at least were not planning on doing so.  

Bankruptcy Looms for SoCal 
It currently looks bleak for SoCal.  Davis and Bryson have expended their political capital on this effort.  The creditors' committee is reportedly meeting to discuss how, when and by whom a filing should take place.  Edison executives have assured Davis that the company will not file for bankruptcy and that its creditors will show restraint. However, it's unclear whether all of the utility's creditors will forebear on an involuntary bankruptcy filing. Spokespersons for several large generators said Friday (9/14) afternoon that they couldn't speculate on what their companies would do if the legislature failed to act on the Edison rescue bill that night.  Davis aides say the governor would seek a reduced rescue package for Edison when the legislature returns, but in the meantime, Davis continues informal negotiations with legislators in effort to stave-off SoCal's bankruptcy.