California Update 4/9/01 ,
 Here is what we know so far with the recent announcement of a deal between 
Socal and the State for the transmission lines:

? The deal may be enough to save Socal from bankruptcy.  This will depend on 
the payment terms as well as how soon Socal can receive a positive cash flow.
? We are not sure if the State can really do a deal without PG&E or a deal 
for whole grid.  It was thought that a transmission asset deal was not 
possible without PG&E.  This may still be the case; the state may still be 
making the deal contingent upon the purchasing of PG&E's assets.  A generator 
source reports that the state is intending to put pressure on the bankruptcy 
court to close the deal on PG&E's lines quickly.  However, bankruptcy courts 
usually do not operate in this manner.  In most cases the court would have to 
hold open proceedings, have competitive bids, etc.
? This purchase would need legislative approval, which is not guaranteed.  
Previously the plan was for the state to purchase SCE's and PG&E's assets at 
a premium so that they would not have to finance power purchases - the 
utilities would be able to buy power for themselves.  Now they would have to 
purchase SCE's lines, but still finance power purchases because of PG&E.  
Additionally, it is possible that Socal swapped the clause allowing then to 
raise rates in order to recoup past debt in favor for an additional book 
price.  If this any form of a utility bailout - it would probably no gain 
legislative approval.
? The purchase would also need FERC approval.  As stated before, if FERC 
approves such a plan it would be with several conditions for California.
john.lavorato@enron.com, louise.kitchen@enron.com