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		 Subject: Fwd: LA Times - Creditors Chafe at State's Pace on Power Crisis


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Subject:	LA Times - Creditors Chafe at State's Pace on Power Crisis
Creditors Chafe at State's Pace on Power Crisis 


By NANCY RIVERA BROOKS, DAN MORAIN, Times Staff Writers


     The California energy crisis is hurtling along two tracks--one the slow 
lane of legislative politics, the other the hyper-speed autobahn of high 
finance. 

     As Stage 3 electricity alerts and billion-dollar debts mount, some 
travelers on those intersecting byways are strapping themselves in for what 
they see as a looming pileup, perhaps at the doors of the U.S. Bankruptcy 
Court. 

     Wall Street is becoming increasingly irritated with the deliberative 
pace of the California Legislature and Gov. Gray Davis and his months of 
unfulfilled vows of a remedy. 

     Those owed money by Southern California Edison and Pacific Gas & 
Electric said Wednesday that they cannot not wait forever to be paid. 

     "The pace of progress is not sufficient," said Joe Bob Perkins, 
president of Reliant Energy, a major power supplier in the state. "Our 
accounts receivable from the past aren't being taken care of and the bleeding 
is growing." 

     In Sacramento, no immediate first aid is on the way. 
     Davis, who says he will announce his latest plan to solve the utilities' 
financial meltdown on Friday, left little doubt on Wednesday that he intends 
to press for a state takeover of the massive electricity transmission system, 
despite its huge value to the utilities. But key legislators predict that, no 
matter what the governor proposes, they are at least two weeks away from 
passing legislation to improve the situation. 

     Bob Foster, the Edison official who oversees governmental affairs, said 
the question of bankruptcy is "a day-to-day thing. There are signs that 
creditors are getting increasingly nervous, increasingly impatient." 

     "We were told last week that there will be a proposal from the 
administration, and we're still waiting," Foster said. 

     Senate President Pro Tem John Burton (D-San Francisco) said that if 
Davis and lawmakers cannot resolve the matter within the next two weeks, "we 
aren't going to be able to solve it, and it will be in other people's hands." 

     Edison and PG&E have said they do not want to file for bankruptcy 
protection and will do so only if forced by their creditors. A prelude to 
bankruptcy, the formation of creditors committees, already has begun. Each 
utility can be forced into bankruptcy by as few as three creditors owed as 
little as $10,775 in unsecured debts, bankruptcy experts say. 

     "We respectfully believe that the state has less time than they might 
otherwise think," Gary Dunton, president and chief executive officer of MBIA 
Inc., a firm that insures $1.3 billion of the utilities' debt. 

     "If someone called me an hour from now [to announce a bankruptcy 
filing]," Dunton added, "I wouldn't be surprised. We have been very clear 
that we are frustrated with the timing, and apparent lack of urgency. 

     "If you have 100 people cooking a stew, it may never be edible." 
     Not everyone, however, believes that the prolonged legislative process 
will make much difference in the long run, despite the howls from creditors' 
and utilities. 

     "I don't sense that there is a sense of urgency," said Assemblyman 
George Runner Jr. (R-Lancaster). Runner, like other legislators, pointed to 
repeated deadlines that have come and gone without a bankruptcy, and said: 
"Crying wolf can go so far." 

     Some legislators blame Davis for the delays. 

     "The Legislature will pass enabling legislation. But people are waiting 
to hear from [the governor's] corner office," said Assembly Republican leader 
Bill Campbell of Villa Park, who has not conferred with Davis for a week. "We 
think it is serious. But it is a frustrating situation." 

     Some lawmakers in Sacramento believe that not all the legislative gears 
are in sync, thus complicating progress. They say Davis has positioned 
himself politically so that the Legislature will carry the brunt of the blame 
when potential rate increases come into effect. 

     "The governor is out there saying no more rate increases and that he's 
on the side of consumers, while we have to do the dirty work," fumed an 
Assembly Democrat, who requested anonymity out of fear that his comments 
would only inflame an already tense relationship between the executive and 
the Legislature. 

     That irritation grew among Assembly Democrats when a poll they recently 
commissioned showed the Legislature's approval rating had dropped 25 points, 
while Davis' rating remained relatively high. The poll, conducted in late 
January by the Sacramento firm Moore Methods, showed Davis with a 45% 
approval rating, compared with only 25% for the Legislature. 

     Meanwhile, the cost to the state treasury of buying power is rocketing 
toward $2 billion, as the Department of Water Resources buys electricity 
because utilities are no longer able to borrow money. 

     "Giving [away] $2 billion that could have gone to build schools, 
housing, highways and help lower taxes for consumers . . . is a moral 
outrage," said Harvey Rosenfield of the Foundation for Taxpayer and Consumer 
Rights. 

     In the meantime, the electricity bills--and defaults by the two 
utilities--continue to swell with no end in sight. 

     California's power plant owners, already frustrated by the hundreds of 
millions of dollars they haven't been paid by the state's two biggest 
utilities, fear that the debt is growing by millions of dollars a day--even 
after the state ponied up taxpayers money to buy electricity for the 
utilities. That's because power purchasers for the state are refusing to pay 
for all of the electricity that grid operators order on a last-minute basis 
to prevent blackouts. 

     Growing anxious over the slow pace of progress in Sacramento, generators 
are looking for help from the courts and from state and federal regulators. 
They won a victory Wednesday when federal regulators ruled that power 
suppliers cannot be forced to bear the risk that they won't get paid when 
grid operators order them to supply emergency power. 

     Davis said Wednesday that the ongoing snags in buying power are being 
worked out. The lingering problem of the utilities' estimated $12.7 billion 
in electricity debts, Davis said, can be fixed by the state's purchase of the 
transmission grid. The money paid to the utilities for the grid--which would 
have to be negotiated--plus lease payments the state would make to the 
utilities to continue operating the 32,000 miles of high-voltage wires, would 
infuse the companies with enough cash to restructure their debt. 

     "We're talking about a financial transaction that has value to both 
sides," Davis said. "It has become increasingly clear to me that we cannot 
accomplish that without purchasing the transmission lines." 

     Although Davis voiced his support of taking over the utilities' 
moneymaking transmission system, he has not conferred with companies' 
executives for a week. In fact, they learned of it from press accounts. 

     "It's all just a giant game of chicken," a top utility executive said, 
asking that he not be identified. "But I'm worried that the administration is 
going to overplay its hand and leave us with no options." 


* * *
     Times staff writers James F. Peltz, Nicholas Riccardi, Stuart 
Silverstein, Rone Tempest, Nancy Vogel and Jenifer Warren contributed to this 
story.
alan.comnes@enron.com, angela.schwarz@enron.com, beverly.aden@enron.com, 