california update 3 21 01 executive summary situation confused filing probably postponed monday could sooner negotiations completely collapse commercial paper holders file pre emptively qfs qfs pressuring legislature rate hikes state generators negotiating ferc davis proposed cpuc payment qfs would require legislative approval tough get friday absent rate hikes bankruptcy filing edison still best option qfs doubts gas supply contracts market value davis price proposals 1 situation confused bankruptcy unlikely monday situation california described confused due flurry activity governor last twenty four hours seems likely state confusion serve forestall involuntary bankruptcy filing next week situation become clearer 2 earlier bankruptcy possible sources believe two events could change precipitate immediate filing 1 breakdown negotiations governor qfs 2 puc order pay qfs 1 billion would seen preference payment cause commercial paper holders file involuntary bankruptcy 3 qfs negotiating davis state generators talking ferc sources report qfs currently either meeting lawyers involved negotiations governor people legislature reportedly working keeley since actually suggested openly needs rate increase sources report state merchant generators occupied today preparing reports ferc ferc made demands generators report market conditions etc governed reactions reports due tomorrow sources indicate ferc placed demands placate california delegation give appearance concern situation california note however ferc make similar demands state generators 4 1 billion payment qfs requires legislative approval could trigger filing commercial paper holders sources report governor continues focus trying get 1 billion payment made qfs forestall bankruptcy filing trying get legislature grant puc authority order payment spite fact payment would seen commercial paper holders preference payment money might returned event bankruptcy filing order puc would likely precipitate involuntary bankruptcy filing commercial paper holders 5 involuntary bankruptcy still attractive qfs davis capuc plan incorporate payments existing debt requires less market standard price concession qfs 75 mw 5 yrs 69 mw ten years current spot market power prices west far exceed values qfs already line need worry pre payments future payments power want payment power provided key weakness proposed plan inability qfs fix costs going forward biggest cost natural gas natural gas supply contracts utilities gas providers would utilities fulfill terms contracts appear reasonable natural gas supplier would enter 5 10 year gas supply contract pg e socal since even bankruptcy contracts could rejected utilities remain credit risk unless price natural gas fixed qfs enter 5 10 year power contracts prices moreover gas price volatility expected increase rather decrease sort state support needed fix gas supply contracts indication state willing make sort commitment state legislature seem willing assume risk point