I don't know whether to laugh or cry.  Your a good lawyer; do you think he can end run the Legislature and the PUC and put the rate agreement in place?  The plot continues to thicken, that's for sure.

Best,
Jeff

-----Original Message-----
From: Evelyn Kahl [mailto:ek@a-klaw.com]
Sent: Thursday, October 11, 2001 1:12 PM
To: Dasovich, Jeff
Subject: RE: Davis devises new borrowing plan 


Thank you, Jeff.  Interesting.

-----Original Message-----
From: Dasovich, Jeff [mailto:Jeff.Dasovich@ENRON.com]
Sent: Thursday, October 11, 2001 10:52 AM
To: Delaney Hunter; 'Phil Isenberg'
Cc: brbarkovich; cra; debinorton; derek.naten; dominic.dimare;
drothrock; ek; jdasovic; john.redding; jstewart; kmccrea; kt; lga;
liebmand; mflorio; mkahl; Robert.Albergotti; smutny; vjw; wbooth
Subject: Davis devises new borrowing plan 


Davis devises new borrowing plan 
His executive order could speed up $12.5 billion in bond sales and
bypass PUC oversight of repayment mechanism. 
SACRAMENTO -- Gov. Gray Davis is crafting a new plan to expedite the
long-delayed borrowing of $12.5 billion to repay the sagging California
state budget for emergency electricity it bought during the energy
crisis. 
The plan -- which could be contained in an executive order as early as
next week -- would minimize the role of the state's top power regulator,
the Public Utilities Commission, which enraged Davis last week when it
declined to sign off on his original plan. 
With enough power now under contract to avert blackouts and plans in
place for the recovery of the two state's largest utilities, the
repayment to the state treasury would resolve one of the last remaining
issues of the energy crisis. 
"That is one scenario," Davis spokeswoman Hilary McLean said Wednesday
when asked about the proposal. "There are a number of different
scenarios being considered. Nothing has jelled yet that is ready to be
publicly announced." 
Most involved in the debate have long agreed that the state should sell
$12.5 billion in revenue bonds, most of which, about $9.6 billion, would
go back into the state treasury. The issue was how to lock in a
mechanism by which the bonds would be repaid - a critical step before
they could be marketed to investors. 
Davis wanted the PUC to approve a plan that would repay the bonds and
cover the state's energy costs through the revenues collected from
ratepayers. But the PUC said the administration's proposal might prove
inadequate over time, leading to future rate hikes. 
The PUC also said the administration's plan gave too much authority to
the Davis-controlled Department of Water Resources, by allowing the
department to raise electricity rates to get more revenue. 
The PUC, which is set up to be an independent board with the sole
responsibility for setting utility rates, did not want to cede that
authority. It rejected the Davis plan Oct. 2 on a 4-1 vote, led by its
president, Davis appointee Loretta Lynch. 
Davis earlier said the commission's approval was necessary to reassure
investors and get the bonds to market. 
The plan now under review, however, would bypass that. 
The DWR would not directly set rates, but under the Davis plan it would
be charged with identifying how the money coming in from customers'
utility bills over the next 20 years would be allocated - in effect,
guaranteeing that paying back the bonds would have equal priority with
paying back the suppliers of the energy. Proponents of the plan believe
that would satisfy Wall Street. 
The administration believes it would require no additional rate hikes. 
Lynch said Wednesday that she had not been involved in the latest
negotiations, but questioned whether Davis had the authority to issue an
executive order allowing the DWR to get involved in setting rates. 
"I've been told for six months that the PUC was needed to pass a rate
agreement. If the DWR can get the bonds sold by themselves, then great,"
Lynch said. "But to dedicate rates, it takes a financing order from the
PUC or a statutory change in law, a statutory set-aside. It takes one of
those two things." 
The governor is likely to announce the plan sometime following his
expected veto of the bill that lays out the Legislature's version of the
payback plan. By law, the governor has until Sunday to act on SB18xx, by
Senate Leader John Burton, D-San Francisco. 
Davis opposes Burton's bill because it gives bond buyers priority in
getting paid, followed by the energy suppliers. The power companies'
contracts contain provisions giving them payment priority, which Davis
believes could throw the contracts into legal dispute. 
If Davis signs the order soon, the bonds could go to market early next
year. Having the proceeds in the state treasury by then is considered by
some critical with the state facing a projected $4 billion to $6 billion
shortfall in other income. 


>  
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