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Enron Mail |
----- Forwarded by Jeff Dasovich/NA/Enron on 04/17/2001 01:05 PM -----
"Ronald Carroll" <rcarroll@bracepatt.com< 04/17/2001 12:43 PM To: <mmilner@coral-energy.com<, <rreilley@coral-energy.com<, <ray.alvarez@ei.enron.com<, <acomnes@enron.com<, <jdasovic@enron.com<, <jsteffe@enron.com<, <linda.robertson@enron.com<, <smara@enron.com<, <snovose@enron.com<, <gackerman@wptf.org< cc: Subject: Fwd: California Deal With SCE Is On Shaky Ground ----- Message from "Tracey Bradley" <tbradley@bracepatt.com< on Tue, 17 Apr 2001 12:25:37 -0500 ----- To: "Justin Long" <jlong@bracepatt.com<, "Paul Fox" <pfox@bracepatt.com< cc: "Ronald Carroll" <rcarroll@bracepatt.com< Subject: California Deal With SCE Is On Shaky Ground CALIFORNIA DEAL TO BUY SCE HEADED FOR TROUBLE IN LEGISLATURE, CPUC _______________________________________________ Date: April 18, 2001 - A source with California State Senator Debra Bowen's (D) office says Gov. Gray Davis' (D) tentative agreement to buy Southern California Edison's (SCE) transmission assets will face tough scrutiny from suspicious lawmakers who do not believe it is in the best interest of ratepayers. State regulators are also expressing concern about the deal and consumer advocates are predicting its demise. "There are two alternatives," says the Bowen source. "Lawmakers will either fashion a better deal or allow SCE to work out their problems in bankruptcy court." Bowen is the chair of the Senate Energy, Utilities and Communications Committee. The deal calls for SCE to sell its transmission assets to the state Department of Water Resources (DWR) for 2.3 times its book value or $2.76 billion. The agreement also calls for the California Public Utilities Commission (PUC) to establish a rate plan so that $3.5 billion of debt could be recovered by SCE for its power purchases before the state began buying electricity in January. "This is the single most important cash flow provision of the memorandum of understanding," says a source with the state Office of Ratepayer Advocate (ORA). "SCE will collect all of the costs they have incurred." ORA had argued against bailing SCE out of debt saying its parent company had ample funds. In return for the premium paid in excess of the value of its transmission assets, SCE has agreed to sell the output of its generating plants at cost-based rates. "Because of the premium, cost-based rates should be lower," says the ORA source. "The senator is very skeptical," says the Bowen source. "The deal is a great benefit for generators and utilities but little, if any, benefit for ratepayers." The source says there is also concern with the SCE deal because it will only involve about a third of the 32,000 miles of transmission lines in the state. "If you buy a third of a bridge don't you wind up getting wet" asks the Bowen source. Davis has expressed optimism that the state will eventually obtain all of the state's utility transmission lines. Pacific Gas & Electric's (PG&E) bankruptcy filing has complicated the governor's plan, but Davis says the state can now obtain the assets through the courts. However, the state must now compete with private companies intent on the same thing. Negotiations between the state and San Diego Gas & Electric are continuing. The Bowen source says provisions in the deal which fashion a way for generators to collect all they are owed by SCE is also of concern to lawmakers. "The state's position was that the rates charged by generators were unjust and unreasonable," says the source. "If you now pay the generators you have, at the very least, a public relations problem." The source says there may also be a court fight over the issue. "The creditors dealing with PG&E in bankruptcy court would probably want the same treatment," says the source. "This creates an intriguing whipsaw effect." A bill outlining the terms of the agreement between the state must be introduced before official consideration begins in the legislature. A source with UCAN says a bill based on the present agreement will never be passed. "If it survives, it will be modified," says the source. Source: Electric Power Alert via EnergyWashington.com Date: April 18, 2001 Issue: Vol. 11, No. 8 , Inside Washington Publishers
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