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To: Bucky Katt who wrote (7638)	1/22/2001 4:14:14 PM
From: gamesmistress	Read Replies (1) \| Respond to of 13094

I know Bush says he wants one, but if all it amounts to is tax breaks for oil and gas companies that's not enough. His top priorities are education and the tax cut. He keeps saying he's a uniter, well, I hope he can "unite" all the different interests enough to produce a general consensus of what the US should be doing about its energy problems.

To: Bucky Katt who wrote (7638)	1/22/2001 10:31:27 PM
From: xcr600	Read Replies (1) \| Respond to of 13094

Investments could get zapped in utilities, usually considered reliable -------------------------------------------------------------------------------- GAIL MARKSJARVIS STAFF COLUMNIST -------------------------------------------------------------------------------- O The threat of bankruptcy at California's two largest utilities, Southern California Edison International and Pacific Gas and Electric Co., is a grim reminder that investing in utilities is not what it used to be. Neither stocks nor bonds in utilities remain the safe investments seniors and other conservative investors once chose for reliable income. And investing in utilities now demands a watchful eye both at the outset of a purchase and while holding a utility investment. After struggling with financial problems for months, Southern California Edison last week said it will run out of cash by early February and would not be able to pay $596 million in bills that are already due. Pacific Gas and Electric said that lenders have cut off its credit. Unable to buy enough power to meet demand, rolling blackouts were imposed last week in areas of northern California. Utility analysts say that California's troubles resulted from a short-sighted state government plan to deregulate utilities, and do not necessarily bode poorly for utilities in other parts of the country. But the problems in California underscore the fact that, with deregulation taking place in one form or another throughout the country, utilities are in a much more treacherous and competitive operating environment. And that makes them less safe as investments. Until recently, utilities were stable investments because state governments regulated the prices electric, gas and phone companies could charge. Regulators reviewed utility company expenses, and then allowed the businesses to charge customers enough to cover those expenses and make a profit. But now the rules are changing. In California, regulators still control prices utilities can charge customers for electricity. But regulators don't control prices power suppliers can charge utility companies. Since the utilities also aren't allowed to produce all their power, the result has been disastrous: Power suppliers are charging Southern California Edison and Pacific Gas and Electric soaring prices, and the utilities can't charge their customers enough to cover the costs. The California Legislature and U.S. Department of Energy are discussing emergency action, but analysts aren't sure whether the utilities can avoid bankruptcy court. Once a company goes into Chapter 11 bankruptcy, banks and lenders that have provided loans that are ``secured'' -- or backed by collateral -- get paid first. Stockholders may find their stock worth nothing; unsecured bondholders may get pennies on the dollar. US Bancorp Piper Jaffray bond analyst Jacob Mercer says bonds in the two California utilities currently are worth only about half of their original value. He thinks the utilities may be destined for Chapter 11 bankruptcy and, as time goes by, bonds should become worth even less than they are now. It's difficult to anticipate the outcome of a potential bankruptcy since only three utilities have gone through one since the Depression, he says. Mercer began telling investors over a month ago to sell bonds in the two troubled California utilities, and Edward Jones utility analyst Brian Youngberg told investors Thursday to sell Edison International stock. He said there is a ``likelihood of the company filing for bankruptcy. The risks for investors have increased rapidly and we see the downside risk being quite significant, including the potential for the share price to fall to $0.'' Meanwhile, Mercer says he's been inundated with questions from investors seeking assurances about other utilities. Although he sees no red flags for utilities in other states, Mercer says careful analysis must be done on any utility in the current environment, and research is difficult because utilities are changing their businesses quickly to compete in less-regulated environments. For example, some companies have given up old parts of their businesses -- such as power production -- and added new businesses. They may not have the management skills to compete in the new businesses or in competitive environments, so the backgrounds of executives should be evaluated. Companies that expand into other countries, or merge with foreign utilities, may be subject to different regulations, too. For example, Youngberg notes the United Kingdom has put a windfall profits tax on some utilities, and some countries don't allow dividends to be taken out of those countries. Mercer advises investors to scrutinize each company as well as the regulatory environment in a state or country where a utility does business. For example, he notes, consumer groups in Oregon have raised some of the same concerns that led to measures that prompted trouble for California utilities -- including an argument against utilities building power plants and recovering costs. Nevada has also been fast to deregulate, but left in place a mechanism for utility companies to recover their costs -- an important provision. Minnesota, says Mercer, has not been hasty about deregulating, and has been conscious of utility company needs. For clues on the strength of utilities, Mercer says, investors can consider bond ratings by rating agencies such as Moody's or Standard & Poor's. But he notes that the two California utilities ratings slid quickly. Less than two months ago, a corporate bond rating of ``A'' did not suggest serious financial trouble or hint at a potential bankruptcy. Mercer also suggests evaluating a utility company's debt load -- a 50:50 debt to equity ratio would be attractive. Investors who prefer mutual funds also need to scrutinize the investments within the funds. Many of the utility mutual funds that have had the highest returns during the last couple of years achieved those returns through companies with risky telecommunications investments. The funds' holdings resemble those you'd expect in a technology fund, rather than a more conservative utility fund such as the Vanguard Utilities Income Fund.