Subject: California Update 5/15/01
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], [email-masked], [email-masked], [email-masked]
Date: Tue, 15 May 2001 09:21:00 -0700 (PDT)

Executive Summary
? New Extraordinary session opened today
? Forbearance period extended for SoCal
? QFs placing liens on SoCal, moving them closer to bankruptcy
? MOU is dead.  Nation's Plan B, an alternative to the MOU, will become a 
bill tomorrow and is gaining interest from both sides of the House.  SoCal 
and Davis has yet to give their support.

New Extraordinary Session
Yesterday, the Senate and Assembly passed resolutions to close the 
Extraordinary Session.  All bills from the 1st session be introduced into the 
2nd session as they were last amended, with the same bill number.  

Forbearance Period Extended
Regarding the forbearance extended to SoCal by banker creditors, the parent 
company's credit has been extended until 30 June.  The utility's forbearance 
is until 15 September.

QFs Placing Liens on SoCal's Assets
The QFs are placing liens against SoCal's assets (property or freezing its 
bank assets).  As a result, SoCal is moving ever closer to bankruptcy, maybe 
as early as later next week.  These actions on behalf of the QFs are added 
incentives for the legislature to move quickly on an alternative to the MOU.

Alternative Plan to the MOU
The MOU for SoCal is essentially deal.  There are a number of alternative 
plans being proposed.  The legislature held meetings last night on Democratic 
Assemblyman Nation's Plan B alternative to the MOU.  This plan is gaining 
momentum.  According to sources, Republican Assembly leader Cox has signed 
off for people to work on the plan implying Republican interest.  Senator 
Burton's office also reported work on the same Plan B.  Governor Davis' 
office is aware of the plan but has yet to comment.  There is also no word at 
this time as to whether the Republican Senate leadership is in support of 
Nation's Plan B.

Key details of the Nation plan include a $1.2 billion option for the state to 
purchase SoCal's transmission assets.  This money would be given to SoCal by 
the state regardless of whether the option was exercised, a detail likely to 
be unpopular with voters.  The remainder of the undercollect, stated as $3.5 
billion or an amount determined by PUC review, would be paid through 
securitization of the undercollect by SoCal.  Moreover, the utility would 
sell the state additional power at a cost beyond the 10 years already agreed 
upon in the memorandum-of-understanding and additional power from other 
company sources.   Sources report that the Nation plan also currently calls 
for generators to take a 30% haircut. 

The Nation Plan B will likely be introduced as a bill tomorrow and will 
likely go through start the legislative process by early next week.  The next 
scheduled floor session is Thursday; we should be able to tell how fast the 
legislature intends to move the bill.  There is no indication whether SoCal 
Edison would agree to the Nation plan.  Sources believe it is likely that 
SoCal would object to at least some of the plan's provisions (for example, a 
PUC audit of SoCal's debt amount to determine the direct rate component to 
pay for the undercollect).  SoCal is very much at odds with the PUC and 
wishes them to play as little role as possible.  If SoCal does ultimately 
agree to the plan, the state reportedly may offer a similar deal to PG&E.