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To: Tommaso who wrote (87529)	2/16/2001 7:53:02 PM
From: The Ox	Read Replies (1) \| Respond to of 95453

Calif. Gov. Unveils Plan to Save Utilities From Bankruptcy Feb. 16-MAR-- By BridgeNews New York--Feb. 16--In an attempt to rescue California's floundering utilities from bankruptcy, Gov. Gray Davis revealed a plan that includes buying the companies' electricity-transmission systems. But the deal may not be enough to end the state's power crisis. The plan would allow the state to buy some 32,000 miles of power lines owned by near-bankrupt utilities Pacific Gas & Electric Co. and Southern California Edison, as well as California's third investor-owned utility, San Diego Gas & Electric. If the California legislature approves the plan, the state will buy the assets, which have a book value between $1.2 billion and $1.3 billion, for about $7 billion, according to analyst estimates. If the state legislature approves the plan, the state treasurer will be authorized to issue revenue bonds to finance the acquisition. The state will contract with the utilities to maintain the transmission facilities and build new ones if necessary. "This is a balanced business transaction," Davis said in a statement released after the plan was unveiled. "It provides real benefits of real value to consumers, and allows the utilities to get back on their feet." He hopes that the purchase will allow Pacific Gas & Electric Co. and Southern California Edison to be able to honor their debts to creditors and power generators. The two utilities have racked up more than $12 billion in debt by buying electricity at wholesale prices that have increased as much as 60-fold from year-ago levels. Since regulators have frozen the prices they can charge their customers at 1996 levels, the companies have been pushed to the brink of bankruptcy. "We're not talking about a bail-out; we're talking about a financial transaction that will have value to both sides," said Davis earlier this week. He estimates that it will take two weeks for the plan to go through the state legislature. While the sale of transmission assets will provide the utilities' with an infusion of cash, it may not be a final resolution of the crisis. "It will probably be enough to stave off the immediate threat of bankruptcy," said Mike Worms, an analyst with Gerard Klauer Mattison. Friday was California's 32nd straight day with Stage 3 power emergency status, which is declared when operating reserves are predicted to fall below 1.5% of demand. A move to Stage 3 status amounts to a declaration that rolling blackouts are possible. On Feb. 1, the legislature passed a bill that would let the government buy power under long-term contracts and resell it to the near-bankrupt utilities. However, many generators are apprehensive about entering into long-term contracts for fear they won't be paid. In fact, for the past several weeks, power generators have been providing power under federal court order to the California Independent System Operator, which resells it to the utilities. The cash-strapped utilities have not been able to make adequate payments, though. In an interview with reporters Thursday, Dynegy Chief Operating Officer Steve Bergstrom said power generators told Davis they were not interested in signing long-term contracts with the state or utilities unless the issue of past receivables was comprehensively resolved. Dynegy said last week it formed a credit committee with Reliant Energy and Mirant (formerly Southern Energy) to pressure the state and the utilities to come up with a solution to ensure that the generators get paid. The biggest question about Davis' plan is whether or not he can guide it to passage. The U.S. Federal Energy Regulatory Commission (FERC) must approve the sale of the transmission assets to the state, and Linda Breathitt, a FERC commissioner, told BridgeNews in an interview this week that she thought the state purchase of the transmission system was unwise. Breathitt did not comment on whether FERC, which oversees U.S. wholesale power markets, should cap electricity prices in the region to help alleviate the utilities' cash crunch. End (Robert Gibbons in New York and Christine Cordner in San Francisco contributed to this report.) [slug: CALIFORNIA-POWER]