Subject: CALIFORNIA UPDATE - 9/4/2001


EXECUTIVE SUMMARY ?
Several procedural scenarios that might play out regarding the Edison MOU.
?
A snapshot analysis of the political dynamics that affect the outcome.
Procedural Scenarios   Assembly  The Assembly Appropriations Committee's plan to take up SB 78XX today will likely be a pro forma hearing moving the bill forward to the full Assembly on a party line vote.
While the controversial land easements amendments had been removed as of Friday's draft bill, it is rumored that the amendments may have returned over the weekend.
If the problematic "Shaver Lake" provisions are removed from the bill, Assembly members may not hear much vocal public opposition from their constituents about rejecting the bill (although consumer groups are opposed and are trying to generate grass roots opposition).
If the Shaver Lake amendments remain, several Central Valley legislators may oppose the plan in committee.
Assembly Speaker Bob Hertzberg supports this Edison deal, and the business community supports some recent amendments.
This likely mitigates concerns from other pro-business Democrats.
With or without the Shaver Lake provisions, Hertzberg should get at least 41 Democratic members (and probably a few more), but no more than 2 Republicans (if any) to vote Aye on the bill.
Hertzberg has more than enough votes to spare from his caucus - he needs 41 votes for the bill to pass, and there are 50 Democrats in his caucus.
If the vote is close, a personal plea from him and/or the Governor should enable him to get to 41.
Senate  The bill would next move to the Senate for approval of the Assembly's amendments.
This is where the prognosticating gets difficult.
Senate President pro Tem John Burton has said he does not support any amendments to SB 78xx.
Gov.
Davis and Speaker Hertzberg will likely meet several times with Burton to try to cut a deal, but relations between Davis and Burton are currently frayed (due to a variety of factors), and Burton is not one to back down from a position unless there is something in it for him to change his position.
This would lead to one of four scenarios:  ?
Burton refuses to have the bill heard in the Senate, and no Edison MOU bill is approved before Sept. 15th,  ?
Burton agrees to let the bill be heard despite his opposition (this option is unlikely),  ?
Burton comes to a deal with Davis and Hertzberg and brings the bill (as it is passed by the Assembly) for a         vote in the full Senate with his support, ?
Burton comes to a deal with Davis and Hertzberg, but as part of the deal, he insists on changes in the bill - thereby sending it back to the Assembly for more amendments, and another vote in the Assembly - before a vote in the Senate.
John Burton is considered one of the smartest, and certainly the cleverest politician in California state government today, so it is problematic to guess his next move.
Additionally, external factors play into the determination of which of these options will result.
For instance, the Governor may be willing to cut a deal with Burton on an unrelated issue that Burton cares more about resolving his way (e.g.
workers compensation benefits, drug courts, reapportionment).
Foretelling what will happen in the Senate is extremely difficult.
But Davis and Hertzberg will try to cut a deal with him, and given Burton's past actions, he may string them along, holding out for several days (maybe even until Sept. 14th) before he agrees to anything.
Governor  Assuming the bill escapes the Senate (and more deals may need to be cut to get enough votes) the Governor will almost certainly sign it, regardless of Edison's public position.
The bill will go into effect 90 days after the Governor signs it.
Consumer groups have vowed to undo any "Edison bailout" enacted into law by way of the ballot box.
That could be either (1) an initiative to pass another bill overturning SB 78xx and replacing it with other provisions, or (2) a referendum to repeal SB 78xx, making it as if the bill was never passed at all.
Initiative  Once drafted and submitted to the Attorney General, it takes 15 days to receive an official title and summary, and another 25 days if the AG determines that a fiscal estimate is necessary.
After either the 15 or 40 days, the Attorney General sends it to the proponents, the Senate, the Assembly, and the Secretary of State.
The day it is mailed is called the Summary Date.
That is the day upon which all calculations are made.
The proponents are allowed a maximum of 150 days to circulate petitions and collect signatures.
However, the initiative measure must qualify at least 131 days before the statewide election in which it is to be submitted to the voters.
Therefore it is past the deadline to qualify for the next statewide election, on March 5, 2002 (statewide primaries), and so, could not qualify until the statewide general election on November 5, 2002.
However the window is tight for that election, as well, and a proposal would need to be submitted to the Attorney General by the end of September 2001 to qualify for November 2002.
The legislature may conduct public hearings on the proposed initiative, but cannot amend it.
So whatever is submitted is what goes on the ballot.
An initiative requires the gathering of signatures equal to five percent of the total votes cast for Governor in the preceding gubernatorial election (419,260 signatures).
The ability to collect signature is heavily dependent on the amount of money the proponents have to pay signature gatherers.
It seems unlikely that the consumer groups will be able to raise that kind of money quickly, but Harvey Rosenfield of the Foundation for Taxpayer & Consumer Rights has been successful at placing pro-consumer initiatives on the ballot before, including Prop.
9 in 1998, which sought to undo AB 1890 before the public understood its ramifications.
Referendum  Referenda on the ballot are fairly rare in comparison to initiatives, although a successful referendum was on the March 7, 2000 ballot.
Prior to that, the last four questions placed before the voters appeared on the June 1982 primary election ballot.
All four were defeated.
Since 1912, there have been approximately 50 attempts to qualify referenda for the ballot.
Of the 50 attempts, 39 qualified for the ballot, 26 of which prevented legislative statutes from taking effect.
The circulation calendar, verification, timing, and the form of petition have different requirements than initiatives.
For example, the California Constitution requires that the process must be completed within ninety days of the enactment of the bill that is being referred.
The signature requirements are the same for a referendum as an initiative statute, though.
Political Dynamics  Notwithstanding the Governor's and Assembly Speaker's desire to enact an Edison rescue package, Senate President pro tem John Burton is in the driver's seat.
In fact, as noted above, there is a perception among some that it is the Governor who needs Burton and not the other way around.
One business source close to the negotiations believes Burton is not inclined to ask his members to make a second vote for an Edison bailout.
In fact, members of both houses are worried about being perceived as bailing out the hobbled utility, their reluctance fed by generators' lobbyists who are sharing survey data that indicates voters blame the utilities for the energy mess and oppose any bailout.
Currently, due largely to this dynamic and others such as the Shaver Lake issue, there are not 41 votes for an Edison rescue in the Assembly.
We believe this will change as the Governor and the Speaker exert their influence, and the bill will pass the Assembly.
As difficult as it is to make predictions regarding the Assembly, the state Senate presents an even larger challenge.
However, at this point it is our opinion that the odds of an Edison rescue package being approved by the state Senate are less than 50 percent.