From: jeff.dasovich@enron.com
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Date: 2001-05-14 15:11:00+00:00
Subject: "Plan B" Starting to Get Notice in Sacramento

From the Dow Jones Newswire:
 
> SoCal Ed May Be Near Financial Solvency With 'Plan B'
>  
>   LOS ANGELES (Dow Jones)--Legislators in California are beginning to
> embrace
> an alternative energy plan, expected to be introduced as a bill this week,
> that would get the state out of the power buying business in as little as
> six
> months and restore Edison International's (EIX) Southern California Edison
> unit to financial solvency without requiring the utility to sell any of
> its
> assets to the state. 
>   If the plan wins the support of both houses of the Legislature,
> lawmakers
> hope it will also convince a bankruptcy court judge in San Francisco that
> it
> can be used to lift PG&E Corp.'s (PCG) Pacific Gas & Electric unit out of
> Chapter 11 bankruptcy protection. 
>   "Clearly this would be a positive development," said Paul Patterson, a
> utility analyst with Credit Suisse First Boston in New York. "It would
> offer a
> way to restore the utilities to financial viability. We've noticed over
> the
> weekend that the situation in the Assembly is improving." 
>   The proposal by Assemblyman Joe Nation, D-San Rafael and Assemblyman
> John
> Dutra, D-Fremont, has gained the interest of some members of the Assembly
> Republican Caucus, all of whom have resisted previous attempts at
> rescuing
> SoCal Ed from near bankruptcy. 
>   Consumer groups have been resistant to any form of what they call a
> utility
> "bailout." But a spokesman at The Utility Reform Network in San Francisco
> said
> the group is studying the 'Plan B' proposal. 
>   On Friday, a spokesman to Gov. Gray Davis said state Sen. Richard
> Polanco,
> the Senate Majority Leader, would introduce legislation this week enacting
> the
> agreement the governor reached with SoCal Ed exactly one month ago that
> would
> allow the utility to issue about $3 billion in bonds to recoup its
> unrecovered
> power costs and sell its power lines to the state for $2.76 billion to pay
> off
> its debt. 
>   But Nation and Dutra, members of the so-called 'Plan B' group, are
> looking
> to alter that agreement. 
>   "There are a lot of people who question the validity of buying the grid"
> from SoCal Ed," Nation, an economist by trade, said. "I think there is an
> understanding that the existing (memorandum of understanding) won't pass."
> 
>   One of the problems with having the state purchase the grid at this
> point is
> that there won't be enough funds available to maintain and upgrade the
> lines
> to improve the flow of electricity, according to several members of the
> Senate
> Budget Committee. 
>   "We're preparing for massive budget cuts this week because of this
> electricity crisis," the member of the Senate Budget Committee said. 
> - - 
>      Plan Eliminates Purchase Of SoCal Ed's Power Lines 
>  
>   Nation's proposal calls for the state to hold a five-year option to buy
> SoCal Ed's transmission lines for its book value price of $1.2 billion,
> and
> eliminate a provision that would ease the regulation of the utility by the
> California Public Utilities Commission 
>   In exchange, SoCal Ed can securitize a larger portion of its $5.5
> billion in
> unrecovered power costs backed by a larger dedicated rate component. 
>   Moreover, the utility would sell the state additional power at a cost
> beyond
> the 10 years already agreed upon in the memorandum-of-understanding and
> additional power from other company sources. 
>   Nation also wants to set up a ratepayer revenue account to refund
> consumers
> if generators agree to accept less than 100 cents on the dollar. He said,
> however, he does not plan to include a provision in any legislation that
> states generators must take a "haircut" on money the companies claim they
> are
> owed by SoCal Ed. 
>   Republicans, including Assemblyman George Runner, R-Lancaster, and
> Assemblyman Keith Richman, R-Granada Hills, have been working closely with
> Nation and the 'Plan B' group. Jamie Fisfis, a spokesman for the Assembly
> Republican Caucus said the caucus is not yet ready to support the plan,
> but
> Republicans are "happy" they are being included in the discussions. 
>   "We have two criteria when we evaluate the plan," Fisfis said. "The plan
> has
> to keep power rates as low as possible and puts more supply into the
> grid." 
>   Steve Maviglio, Davis' press secretary, said the governor "has always
> said
> he's open to improvements" in the memorandum-of-understanding. 
>   "But it has to remain a balanced transaction," Maviglio said. 
>   Nation, a member of the Assembly since 2000, said the state would only
> have
> to spend a couple of weeks renegotiating the memorandum-of-understanding
> with
> Edison and that it could likely win a two-thirds majority vote in the
> Assembly
> shortly after that. 
>   Nation said he has had a number of conversations with Edison
> International
> executives on his proposal and "they have been generally receptive because
> they believe the agreement with the governor won't pass." 
>   A SoCal Ed spokesman was unavailable for comment. 
>    Lawmakers Seeking Quick Exit From Power Buying Business 
>  
>   California has committed $7.2 billion of its roughly $8 billion general
> fund
> buying power since January on behalf of PG&E, SoCal Ed and Sempra Energy's
> (SRE) San Diego Gas & Electric unit. 
>   But several lawmakers and one of Davis' financial advisers said Sunday
> that
> the state wants to desperately get out of the power buying business soon
> because of the economic impact the energy spending will likely have on
> education, transportation and other state programs. 
>   "We are beginning to realize that if we don't get out of the business of
> buying electricity, we will be in the same boat as the utilities," said
> one
> state Senator who is also a member of the Senate Budget Committee. 
>   Nation agreed, saying "the best thing we can do for California is get
> out of
> this mess we're in. We need to get the DWR out of the business of buying
> power." 
>  
>   Lawmakers Working To Keep SoCal Ed Out Of Bankruptcy 
>  
>   A number of Democrats in the Assembly, who have said SoCal Ed may be
> better
> off in bankruptcy, now want to see the utility remain solvent, Nation
> said. 
>   "I think several months ago bankruptcy wouldn't have seemed like such a
> challenge," Nation said. 
>   Nation said he fears that if SoCal Ed were in a bankruptcy setting, the
> state's so-called qualifying facilities, renewable and gas fired power
> plants
> that contract directly with the utilities, may win the right to sell their
> cheap power on the open market. 
>   "If that happens, it will dramatically raise the risk to the state
> because
> we will be forced to buy that power," Nation said. "I think people
> understand
> what the risks are and that's a real danger." 
>  
>    -By Jason Leopold; Dow Jones Newswires; 323-658-3874;