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To: UnBelievable who wrote (65521)	12/30/2000 5:41:56 PM
From: Les H	Read Replies (3) \| Respond to of 99985

HEADLINE: GREENSPAN'S CALIFORNIA POWER CRISIS TALKS BOOST HOPES FOR US RATE CUT BYLINE: Andrew Garfield Financial Editor BODY: HOPES THAT the US Federal Reserve may cut interest rates early in the new year resurfaced yesterday as Alan Greenspan, the chairman, met the Governor of California in Washington to discuss a crisis that threatens to bankrupt the state's two biggest power utilities. The companies - Pacific Gas and Electric and Southern California Edison - are having trouble rolling over debt in the face of rising wholesale electricity prices. The crisis threatens to become the first big test for president-elect George W Bush, who has been briefed on it. In the past week Fed officials have been contacting debt underwriters and analysts in an attempt to evaluate whether the problem could have wider implications for the markets. The California Public Utilities Commission, which regulates power prices in the state, will hold emergency hearings today and tomorrow to consider how to lift a four-year freeze on retail electricity prices in the West Coast state. A chronic shortage of electricity has led to a sharp rise in wholesale prices, accusations of "price gouging" by power suppliers and unrecovered costs estimated as high as $ 8bn (pounds 5.4bn) by Pacific Gas and Electric and Southern California Edison. Last week Edison said it would shed 400 staff to cope with the fact that it has had to pay out $ 3.5bn more to buy power than it has been able to raise from customers. The crisis comes as US corporate debt markets are already showing signs of strain, amid mounting fears of defaults. There is said to be about $ 2bn of debt owed by the two Californian power companies falling due over the next two months. The Fed meets next on 30 January. It would not normally move on interest rates so early in a year, but sentiment in the US markets has deteriorated sharply in the past few weeks and the prospect of a rate cut is the only thing underpinning them in the face of mounting profits warnings. Yesterday, as Wall Street opened after the holiday, there were signs of cautious bargain-hunting. However, overall sentiment remains fragile. With pre -Christmas sales well below last year's, US stores have been price-cutting earlier than usual to shift end-of-season stock. The Dow Jones index was down slightly - by 6.07 at 10,629.49 - in midday trade. European markets were closed. There was more bad news in Asia, where the yen fell sharply against the dollar and the euro after data showed the Japanese economy continuing to struggle. The yen hit a 16-month low against the dollar of 113.65 after figures showed that unemployment was rising and consumer spending weak. Japan's jobless total reached 4.8 per cent in November, the highest since March's record of 4.9 per cent. Economists had been hoping that the figure would hold at October's rate of 4.7 per cent. Japan's household spending fell by 2.1 per cent in November. Industrial output figures are due today; economists expect this to be flat at best after a 1.5 per cent rise in October.