RE: California Power Crisis Deepens
By Arthur Spiegelman (on nasdaq.com 01/05/2001)
Question #1. Who benefits (ie other utilities, trusts etc) if Pacific Gas and Electric or Southern California Edison do have to declare bankruptcy?
Question #2. As I see it lightbulbs still need to turn on in California...so where will the 1,850 people (# is total number of jobs cut by utility) go to work now?
(I asked #2 because electricity demand is not going away so the layoffs are due to these particular utilities getting themselves into major financial trouble (and that fact isn't going away) yet I would think that the jobs/tasks tied to producing electricity still exist they will simply
shift to other employers wouldn't they?)
Question #3 on Friday, California State Treasurer Philip Angelides proposed a plan to create a new financing authority able to issue up to $10 billion in tax-exempt and taxable bonds to finance new power plants and expand the transmission grid...so...
Who are some potential electric utility recipients (stock symbols please besides PG&E and South Cal Edison)) who could receive public money from this proposed new financing authority in California?
-def
A R T I C L E:
California Power Crisis Deepens
By Arthur Spiegelman
LOS ANGELES (Reuters) - One of two California public utilities tottering on the brink of bankruptcy laid off 13 percent of its workforce on Friday as fears gripped Wall Street that the electricity crisis could spread its contagion to the banking and other sectors.
Bank stocks fell sharply as the New York Stock Exchange ended the first week of the New Year on a down note with many wondering whether a major government bailout will be needed to resolve the crisis. California lawmakers are expected to tackle the issue in an emergency session next week.
Both Pacific Gas and Electric, a unit of PG&E Corp. and Southern California Edison, part of Edison International, have warned that they could file for bankruptcy within weeks.
Underscoring its dire financial plight, Southern California Edison announced Friday that it was laying off 1,450 people or about 13 percent of its workforce of about 11,000.
The Rosemead, Calif., electric utility said the latest cuts will bring to 1,850 the total number of jobs cut by the company since the California electricity crisis began.
Credit rating agency Standard & Poor's, which cut the utilities ratings to the cusp of junk bond status on Thursday, said on Friday that Southern California Edison was ``probably'' closer to bankruptcy than its larger rival, Pacific Gas and Electric Co.
A top California trade union official told Reuters that ''labor will pay the price for the failure of deregulation.'' Jack McNally, business manager of the International Brotherhood of Electrical Workers (IBEW) Local 1245, said that the state's utilities ``will have to cut the workforces pretty close to the bone'' if their financial problems are not quickly resolved.
A spokesman for PG&E said, ``At this point, any discussion of workforce reductions would be premature.''
UTILITIES CAUGHT IN CRISIS
Both utilities have been caught in a crisis unleashed by a decision to deregulate the energy market in California, the most populous U.S. state, which if it were a separate country would have the world's sixth-biggest economy.
The two companies find themselves forced to buy electricity from vendors at skyrocketing prices but unable, because of a rate freeze, to pass those costs on to its customers. As a result they have gone $12 billion in debt just through buying energy over the last few months.
Rumors circulating that Bank of America Corp. had a large exposure in the crisis unleashed tension on Wall Street. Bank of America denied it had any trading losses but its stock price fell $$3-13/16 to $47-11/16.
Fighting to avoid bankruptcy, Pacific Gas and Electric and Southern California Edison are pushing Gov. Gray Davis and California lawmakers to come up with a plan that will let them recover the extra billions they have spent so far buying power, industry sources said.
Details have not been hammered out yet, but they are seeking legislative approval for issuance of state bonds to pay off hefty power costs. The specter of bankruptcy loomed larger for the state's two biggest utilities as major ratings agencies slashed their credit standings even though state regulators agreed Thursday to immediately allow the utilities to raise rates by an average of 10 percent for 90 days.
But analysts and the cash-strapped firms said the hike was woefully inadequate to meet their dramatically increased wholesale power costs.
In the bond package being pushed by the utilities, bonds would be issued by a state entity and be repaid by a long-term surcharge on the monthly electric bills of utility customers, sources said. In another move on Friday, State Treasurer Philip Angelides proposed a plan to create a new financing authority able to issue up to $10 billion in tax-exempt and taxable bonds to finance new power plants and expand the transmission grid, among other projects.
These bonds would not go toward paying off the utilities' debt but would create a steady future source of funding to provide adequate power and develop a possible long-term solution to the emergency.
Meanwhile, a federal court in Washington denied a lawsuit by Southern California Edison that challenged deregulation.
The Clinton administration set a meeting for Tuesday of Treasury Secretary Lawrence Summers, Energy Secretary Bill Richardson and other members of the administration with executives of PG&E Corp and Edison International.
The meeting, which comes less than two weeks before the Clinton administration leaves office, will also include members of the independent Federal Energy Regulatory Commission and Gov. Davis. Reut20:18 01-05-01 |
