This PG&E bankruptcy is a much larger event than has been acknowledged yet. We're entering uncharted waters, and those who think it's just California's problem are in for a rude shock. Who knows what the bankruptcy judge will do ? Perhaps he'll try to stick it to the ratepayers, who will then revolt with a poorly thought out state takeover initiative. Or maybe he/she will tell the power gougers they're going to get paid 30 cents on the dollar for past due bills, and they'll get pissed and hold back power supply. Stockholders in PG&E (many retirees nationwide, as well as pension plans and other funds) may get stuck losing all their holdings to the bondholders - and will this now expand to the other CA utes ?
CA residents can ride this thing out, except those who may be too fragile to survive the desert heat without air conditioning. They'd better get serious about cutting power usage, and soon. The ripple effect on business will not be inconsequential. Bush's hands off policy to protect his Houston pals will boomerang back to haunt him big time if he doesn't decide to intervene with price caps and a little leadership, at least for the short term until the new plants come online. Davis tried, but with limited leverage and his timid nature, has not come through. Pete Wilson sits quietly in the background, when he's the one who started this whole f*cking mess.
Read this, to get an idea of what we could be in for if wiser heads don't prevail (or read the whole link if you really want an education) :
prudentbear.com
The acutely fragile U.S. financial system suffered a major blow this
afternoon with the bankruptcy filing of Pacific Gas and Electric, the
largest ever utility bankruptcy. PG&E has liabilities of $18 billion, with
losses mounting at a rate of $300 million each month. Several leading
banks, Wall Street firms and numerous power generators have significant
exposure to PG&E (as well as Edison International and various energy
generators). Even more troublesome, the company has borrowed
aggressively from money market funds, and this bankruptcy will certainly
reverberate throughout the industry. This is now very much a systemic
financial crisis. The utilities and others involved in this quagmire have
numerous and long tentacles, and there is certainly the possibility of
considerable disruption in energy and credit derivatives, as well as within
"structured finance" generally. Today’s filing follows the recent $12
billion bankruptcy of Asia Pulp and Paper, also with negative
ramifications for the asset-backed and swaps marketplace where it had
become a significant player. Numerous other international issues,
including crisis in Turkey and Argentina, are also factors in this arena.
Throw in the recognition of "off-balance sheet" losses by American
Express and increasing liquidity concerns for the likes of industry
heavyweights Lucent and Motorola, and it becomes clear that there has
been a significant escalation in the unfolding U.S./global financial crisis.
Bloomberg quoted an energy law attorney: "This is taking the crisis in
California thermonuclear. This throws all the assets into a pot and
everyone who is owed money has to scramble." This news also comes as
the state of California prepares to issue up to $14 billion of energy bonds
to finance this unfolding debacle. The California energy crisis is now a
rapidly spreading and highly contagious cancer. Especially with this
morning’s weaker than expected employment data, we will go into next
week anticipating action by the Fed. |
