FYI: Sacramento Bee--Dan Walters: Repaying huge power debts still ,
 Sue Mara
Enron Corp.
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	"Beiser, Megan" <Megan.Beiser@edelman.com>
	06/13/2001 04:39 PM
		 
		 To: "'arem@electric.com'" <arem@electric.com>
		 cc: 
		 Subject: FYI: Sacramento Bee--Dan Walters: Repaying huge power debts still  
looms as a high political hurdle


Dan Walters: Repaying huge power debts still looms as a high political
hurdle

(Published June 13, 2001) 
Gov. Gray Davis has been running around California lately proclaiming that
California is "turning the corner" on the energy crisis, explicitly citing
sharply lower wholesale prices for electricity and, implicitly, his improved
standing in polls. 
Events will reveal whether Davis' June hubris was justified. Despite the
recent drop in spot power prices, however, many aspects of the energy crisis
remain unresolved, and chief among them is liquidating the $20 billion-plus
in debts that utilities and the state have accumulated for power purchases. 
A $13.4 billion bond issue that is supposed to reimburse the state's general
fund for more than $8 billion advanced for power purchases and then finance
future electricity buys has been hung up by demands of potential bond
underwriters for more assurances about repayment. The bonds may not be sold
until August, if ever. And by then, nearly the entire bond issue may have to
flow to the state's general fund, leaving little to finance future power
buys. 
And then there are the $14 billion or so in debts that the state's two big
utilities, Pacific Gas and Electric and Southern California Edison, incurred
for power purchases before their credit was cut off in January. PG&E already
has declared bankruptcy, and Edison was on the verge when Davis hurriedly
signed a "memorandum of understanding" (MOU) on a rescue scheme, the
centerpieces being state purchase of Edison's share of the intercity power
grid, plus a plan for ratepayers to pay off the utility's debts. 
The Edison scheme has been denounced as a "bailout" by consumer activists
and faces certain legislative rejection, despite a multimillion-dollar
lobbying and public relations drive by the utility. And it's sparked a
complex set of private maneuvers in and around the Capitol that are fraying
the already cool relations between Davis and the Legislature's most powerful
leader, Senate President Pro Tem John Burton. 
Davis called a dozen senators into his office Monday to press approval of
the Edison MOU with minimal changes. Burton, who didn't attend, says the
governor threatened legislators with rejection of their bills or budget
appropriations if they didn't play ball, and promised retaliation if Davis
uses strong-arm tactics for Edison. 
"On an issue like this, they (legislators) ought to be able to vote their
consciences," Burton told reporters, denouncing the Edison deal as a
"flat-ass bailout." 
Davis spokesman Steve Maviglio rejected Burton's account: "The governor's
too smart to do any of that." 
As the public squabbling heats up, so is the private search for a compromise
that Edison, consumerists and other principal players can accept -- without
much confidence that it can be found. A dizzying array of MOU alternatives
is being floated, including an effort by Burton and Assembly Speaker Bob
Hertzberg to persuade Edison creditors to write off part of the debt, and
for big industrial and power consumers to shoulder the rest in return for
recapturing the authority to make power supply deals outside the utility
grid. 
In effect, the plan would create two power systems, one with regulated rates
for individual and small business customers and unregulated "direct access"
for big users. Former Assemblyman Phil Isenberg, a lobbyist whose firm
includes energy generators, is acting as a mediator on behalf of Hertzberg. 
Sources close to the negotiations say the big users won't entertain the deal
until they know how much power the state has been buying, and at what
prices. Davis has insisted on keeping that data secret, and has been sued by
the news media and others to force release, but on Tuesday announced that he
will agree to opening the supply contracts to inspection. 
The chances of an Edison deal coming together this summer are no better than
50-50 -- about the same odds of the state's completing its bond sale. And
those uncertainties are compounded by great fears that California still
faces the prospect of widespread and prolonged power blackouts this summer.
"I don't think it's over," Burton said Tuesday in a jab at Davis. 


The Bee's Dan Walters can be reached at (916) 321-1195 or
dwalters@sacbee.com .
alan.comnes@enron.com, angela.schwarz@enron.com, beverly.aden@enron.com, 