More Amusing News from California ,
 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.
f..calger@enron.com