Message-ID: <28787222.1075844240302.JavaMail.evans@thyme> Date: Tue, 15 May 2001 09:21:00 -0700 (PDT) From: kristin.walsh@enron.com To: john.lavorato@enron.com, louise.kitchen@enron.com Subject: California Update 5/15/01 Cc: phillip.allen@enron.com, tim.belden@enron.com, jeff.dasovich@enron.com, chris.gaskill@enron.com, mike.grigsby@enron.com, tim.heizenrader@enron.com, vince.kaminski@enron.com, steven.kean@enron.com, rob.milnthorp@enron.com, kevin.presto@enron.com, claudio.ribeiro@enron.com, richard.shapiro@enron.com, james.steffes@enron.com, mark.tawney@enron.com, scott.tholan@enron.com, britt.whitman@enron.com, lloyd.will@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit Bcc: phillip.allen@enron.com, tim.belden@enron.com, jeff.dasovich@enron.com, chris.gaskill@enron.com, mike.grigsby@enron.com, tim.heizenrader@enron.com, vince.kaminski@enron.com, steven.kean@enron.com, rob.milnthorp@enron.com, kevin.presto@enron.com, claudio.ribeiro@enron.com, richard.shapiro@enron.com, james.steffes@enron.com, mark.tawney@enron.com, scott.tholan@enron.com, britt.whitman@enron.com, lloyd.will@enron.com X-From: Kristin Walsh X-To: John J Lavorato, Louise Kitchen X-cc: Phillip K Allen, Tim Belden, Jeff Dasovich, Chris Gaskill, Mike Grigsby, Tim Heizenrader, Vince J Kaminski, Steven J Kean, Rob Milnthorp, Kevin M Presto, Claudio Ribeiro, Richard Shapiro, James D Steffes, Mark Tawney, Scott Tholan, Britt Whitman, Lloyd Will X-bcc: X-Folder: \Richard_Shapiro_June2001\Notes Folders\Discussion threads X-Origin: SHAPIRO-R X-FileName: rshapiro.nsf 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.