 California Update--08.09.01 ,
 THE LEGISLATURE
No material change from the last update.  
The Legislature is in recess and the two bills that passed the Senate--SB 78 and SB 18--continue to sit in the Assembly, waiting for the Assembly to return.
A handful of Democratic Assembly legislators and staff have been meeting over the recess to determine whether they can 1) reach agreement on the bill that they've been working on (AB 82) in the Assembly and 2) reach agreement with the Democrats in the Senate.
The key features of SB 78 would: 
allow Edison to recover $2.5 of the $3.5 B of payables.  The $2.5 B would go to paying the banks and the QFs.  
leave Edison to figure out how (e.g., negotiate) to cover the remaining $1B in payables to suppliers (including Enron).
force the largest business customers to pay for 100% of the $2.5 B in payables.
give the State the option to buy Edison's transmission assets at book.
do nothing to ensure Direct Access is maintained.
The key features of AB 82 would:
attempt to keep Direct Access alive, though the bill doesn't go nearly far enough
adopt the onerous features
The key features of SB 18 would:
restructure the way in which the upcoming bond issuance is financed by creating a "dedicated utility rate component" (i.e., a fixed charge) to service the bonds.
de-link payments to suppliers holding DWR contracts from payments to service the bonds to pay back the General Fund.
Allow the PUC to hold a public hearing on DWR's contracts.

A consortium of small and large businesses and business associations sent a strongly worded letter today to Davis and all members of the CA Legislature expressing extreme opposition to both 78 and 82.  I have a copy of the letter and will distribute to anyone who would like to see it.
The business consortium strongly supports SB 18 because they fear they will get stuck with the DWR contracts and they are lobbying hard to have them nullified or re-negotiated.
The Treasurer and the Governor oppose the bill because they believe it would constitute contract breach, and the contract provisions require the state to pay the present value of the contract plus LD in the event of a breach.
Calpine, who holds about 50% of the DWR contract volume, is also vocally opposed to SB 18.

THE CALIFORNIA PUC
Since the legislature failed to pass comprehensive legislation addressing CA's crisis, the issues now revert back to the PUC.
In particular, the PUC is slated to rule on August 23rd on whether Direct Access should be suspended.
The Treasurer has said that DA must be suspended in order to remove the risk that DA would create with respect to servicing the bonds.
AB 1X, the law that authorized DWR to buy power, gives the PUC the authority to suspend Direct Access.
Enron is leading a large group of customers and suppliers in an effort to stop the PUC from suspending Direct Access.
The group is writing a letter to Davis, the PUC, the Treasurer, DWR and the Legislature urging them to maintain Direct Access.
The group is also making a submission to the PUC as early as Monday to provide the Commission with alternatives that permit the PUC to keep Direct Access.
The group is also mounting a PR campaign that it wil launch simultaneously the release of the letter and the submission to the PUC.
The goal is to have the PUC adopt one of the group's alternatives instead of suspending DA, or at a minimum, delay any action on Direct Access.
jeff.dasovich@enron.com