california update 3 01 01 according source attended private dinner last night gov davis nyc 1 davis tried express confidence positive outcome california situation repeatedly pressed continually failed point specific reasons optimism long term contracts state signed strictly principle details long term contracts state signed april 9 th escape clause deal pg e transmission purchase least 30 days away thus far pg e agreed anything negotiations davis terrified third party bid transmission assets 2 state financial picture worsening davis quixotic quest avoid rate hikes state spending 40 50 million per day keep lights buying power california department water resources deal reached summer costs would rise 75 80 million per day state already used 3 billion 10 billion allocated power crisis trend continues state surplus could jeopardy state switches deficit shaky credit rating could result expensive nightmare scenario davis including state tax increases cuts core state services electricity rate increases 3 davis less emphatic avoiding bankruptcy davis told source could understand pg e would prefer bankruptcy options transmission sale source believed davis hoping bankruptcy court la federal court hearing front judge lew march 5 th provide davis political cover rate hikes meanwhile sacramento based source reports 1 ferc chairman curt hebert determined find regulatory authority transmission line purchase proposal davis ferc involvement could postpone resolution current edison prospective pg e deals hebert would use ferc reciprocal agreements publicly owned utilities basis exerting jurisdiction proposed california power authority 2 legislature continues lose faith davis democrat caucus concerned state finances likelihood rate increases republican caucus sees political opportunity portraying davis wasting time transmission asset purchase proposal rather dealing direct solutions crisis democrats republicans concerned davis plan work agree way around increased rates even transmission asset deal goes state still hook 40 50 million per day power purchases ab ix requires money spent dwr repaid general fund however may revenue bonds issued legislative analyst office lao noted cash flow concerns department finance expects revenue bonds issued mid late may