california update 1 31 01 please hesitate contact robert johnston x 39934 kristin walsh x 39510 additional questions executive summary announcement could made early today regarding first wave long term contracts price term threat bankruptcy significantly diminishing davis hatches plan 1 pass court ordered rate increases 2 issue revenue bonds audit results questions loom amount funds transferred parent companies davis expected use threat endless appeals courts possible ballot initiative november keep pressure parent companies pay share utility debt well limit scope rate hikes davis hopes court ruling favor utilities would provide political cover needs pass rate hikes california consumers avoid utility bankruptcy davis walking fine line consumer advocacy groups ballot initiative november challenge expected court ordered rate hikes could disastrous investor confidence state legislation bail bill ablx heard several hours senate appropriations yesterday issues still remain regarding tiered rate structure specifically communities harsh climates however bill received support almost everyone including consumer groups bill expected pass sometime today tim gage ca director finance said davis supports provisions ablx expected sign bill abl 8 x heard assembly yesterday expected hear today committee hearings monday dwr testified spent 400 spending 45 day spot market buy power according sources direct access governor davis going court battle discussed viewed excellent opportunity settlement davis recognizes 1 expected court ruling cpuc case likely authorize utilities increase rates charged california rate payers 2 despite ruling state government ability delay eventual reward order long enough cripple two utilities unless come terms thus davis believes california consumers avoid getting hit higher electricity charges plans use threat appeal possible ballot initiative limit amount rate hikes plan exempt lowest income smallest consumers rate increase concentrate rate increases among consumers using 130 baseline usage rate gaining serious momentum last night sacramento would still hit one half consumers since baseline set 60 average consumption progressive politically important sense making work would require solving minor crisis erupted last night pg e admitted stopped reading electricity meters many customers estimating bills based previous usage rates company defense laid meter readers conserve cash met widespread derision consumer advocates pointed estimation policy conveniently allowed company charge despite serious efforts californians use less electricity every time think moment utilities embarrass something like happens one legislator moaned long term contracts second key keeping eventual rate increases lies negotiations almost complete first wave long term power buying contracts davis initiated earlier month first wave contracts announced perhaps early today surprisingly positive according officials talks got series good offers initial proposals good ones one official told source idea announce results first contract talks good guys go back others say want terms think eventually shake loose lot supply strategy bankruptcy new dynamics improved market confidence california emerge current energy crisis without bankruptcy socal edison pg e even set miss another round payments creditors suppliers today remember standstill agreement among creditors ask accelerated payment feb 13 believe sense optimism given even credible boost court case front us district judge ronald w lew los angeles likely mushroom kind political cover elected officials make settlement possible end next week latest fact without political cover would impossible square various circles crisis audit results ballot initiatives markets bush administration officials perhaps utility companies underweighting possibility citizens groups launch successful ballot initiative fall 200 l bring electricity generation back state control threat proposition initiative mounted two audits utility companies ordered california public utilities commission released last 48 hours confirmed two seriously damaging points warning since mid january first audit socal edison confirmed 2 billion debt utility claims owes energy suppliers actually owed corporate holding structure generates sells power second confirmed edison electric paid nearly 5 billion profits holding company used money buy back stock increase dividends effort keep stock price even going debt issuing binge audit pg e released late last night even damaging pg e management sharply criticized poor decisions failing react clear warning signs approaching energy crisis making deep spending cuts including scaling back management salaries auditors also questioned utility decision funnel 4 7 billion profits since deregulation coffers parent holding company used cash mostly pay dividends buy back stocks basically took money ran state senate speaker burton put yesterday appears governor gray davis grudging acceptance reality actually highly evolved effort produce solution provides enough rate hikes taxpayer subsidy help solve current crisis without triggering new far damaging burst populist outrage among voter base still thinks utility companies basically making doubt use money socal edison debts owes perfectly legal keeping spirit 1996 deregulation law irrelevant popular political terms political cover potentially afforded court case discussed audits would make settlement extremely difficult keeping anger exploding ballot initiative fall key understanding complex game davis advisers senior legislators playing ballot initiative would potential disaster since would almost certainly aimed establishing full public control electric utilities even state utilities successfully challenged initiative court would years victory clear would freeze new private investment prolonged period something california afford businesses would moving new ones failing relocate court battle thus legislators listening horror hear ugly details court case los angeles socal edison pg e likely win mid february court likely grant two utilities 12 7 billion relief cost would fall immediately shoulders consumers would see bills rise least 30 california politicians could see emergence one thing everyone needed since start extended drama political cover davis rely political negotiating skills pressure parent companies utilities pass something less full 12 7 billion debt pg e socal edison already round one legal battle designed let raise electricity rates enough recover debt accumulated since august last year puc refused let raise prices even electricity prices soared court said 1996 deregulation law crystal clear two utilities repaid called stranded costs free begin charging whatever needed charge consumers cover cost acquiring power although utilities case judge stayed order february 14 th state government request deadline approaches intense new negotiating round way one hand political officials know ultimate political cover higher electric prices courts made hand also know immediate full compliance court order would force electricity rates 40 top natural gas bills soared 300 since last year utility companies playing card aggressively negotiations scope shape final bailout wait court puts order effect mid february even bankruptcy emerge quickly easily one tactic state political officials using order force settlement threat keeping law suit tied court next couple years one political official pointed could keep utilities receiving money year next year perhaps even year sure tell probably win court get money eventually making well aware unless settlement appeal court ruling way supreme court keep tied next two years least think creditors quite patient