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Enron Mail |
Some Generators Say No As Calif Lawmakers Eye Haircut ????
Updated: Monday, July 16, 2001 04:52 PM?ET ????? ? By Jason Leopold and Jessica Berthold Of DOW JONES NEWSWIRES LOS ANGELES (Dow Jones)--Some power suppliers said Monday they wouldn't accept a move by California state lawmakers to allow them to collect just 70% of what they are owed by Edison International (EIX, news, msgs) unit Southern California Edison. At issue are bills scheduled for hearings Monday and Tuesday in the state Assembly and Senate to rescue Southern California Edison from the verge of bankruptcy, where it has teetered for six months. Both bills aim to spread out the costs of helping the utility recover $3.5 billion in wholesale power costs that it was forced to absorb as a result of a retail rate freeze. Discounts to unpaid power bills may be needed to make the rescue politically palatable. But some suppliers, which together are owed about $1 billion by the utility, are balking. "As we have said before, we fully expect to receive 100 cents on the dollar," said John Sousa, spokesman for Dynegy Inc. (DYN, news, msgs), which is owed $265 million in California. (Generators' receivables due from Southern California Edison alone weren't immediately available.) Reliant Energy Inc. (REI, news, msgs), owed a total of $370 million, said it too expects to receive full payment. Williams Cos. (WMB, news, msgs), which hasn't disclosed its California receivables, and Duke Energy (DUK, news, msgs), which is owed $410 million, have said publicly that their companies would be willing to accept less than 100 cents on the dollar. But Duke spokesman Tom Williams said his company would only negotiate with the utilities, not the state. Pat Dorinson, spokesman for Mirant Corp. (MIR, news, msgs), which is owed $385 million in California, wouldn't say whether the company would accept less than what its owed. But he said the company wasn't included in the negotiations when the bill was drafted. "We can't have a comprehensive solution if all parties are not at the table," Dorinson said. "No one has come to us and talked to us about what we are willing to do or not do. You'd think the people producing the energy might have on opinion on how things should be solved." Suppliers said they weren't sure what action, if any, they'd take against the utilities if such provisions were approved as part of a deal this week. The Assembly and Senate proposals were expected to be debated on Monday and Tuesday, with floor votes on Wednesday. Assembly Speaker Pro Tem Fred Keeley, D-Boulder Creek, said a rescue plan for Southern California Edison could never pass the Legislature without concessions from generators. The proposals in both houses call for generators to accept 70 cents on the dollar. In the Assembly, legislation introduced last week by Assembly Speaker Bob Hertzberg, D-Van Nuys, and Keeley, aims to establish a trust account, controlled by the state and the Public Utilities Commission, to reduce payments to generators who overcharged for power. "Our proposal protects those who deregulation has hurt most - consumers - and ensures that California never sees a crisis like this again," Hertzberg said. "It holds accountable those who have taken advantage of us and it promises consumers that they will see rates go down rather than up." Such a move may violate Constitutional protections regarding contracts, said Kenneth Klee, a law professor at UCLA and attorney at Klee, Tuchin, Bogdanoff & Stern LLP in Los Angeles who specializes in corporate reorganization, bankruptcy law and insolvency. "The contracts clause of the Constitution, Article 1, Section 10, prevents the states from impairing the obligations of contracts," Klee said. "I haven't seen the bill, but it occurs to me that if the state is trying to tell Edison it can pay creditors 70 percent, that would be unconstitutional." Klee's firm represents two independent generators in the legal wranglings with Southern California Edison. -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com (Jessica Berthold contributed to this article.) California Lawmakers Take Edison Rescue Down To The Wire ???? Updated: Monday, July 16, 2001 04:19 PM?ET ????? ? By Jason Leopold Of DOW JONES NEWSWIRES LOS ANGELES (Dow Jones)--It's coming down to the wire. With just five days left before their summer recess, California lawmakers were to take their first concrete steps Monday toward relieving Edison International (EIX, news, msgs) utility Southern California Edison of the massive power costs that have left it unable to meet its obligations. Edison officials have warned that if the Legislature doesn't act by Aug. 15, the deadline set in a memorandum of understanding signed with Gov. Gray Davis on April 9, the utility's creditors may drag it into Bankruptcy Court. The plans under consideration aren't entirely faithful to the MOU and present their own risks, but Edison officials seemed relieved that progress was finally being made. "This is the culmination of a long period of negotiations," Brian Bennett, vice president of external affairs for Edison International, said last Friday. "We're pleased that both the Assembly and Senate are moving." Davis spokesman Steve Maviglio said Monday that the Assembly and Senate would hold hearings on their versions of the rescue Monday and Tuesday, with floor votes expected Wednesday. The progress has boosted Edison International shares to their highest level since mid-March. Edison shares closed Monday at $14.85, up 5 cents on the day and more than 32% in July. Under the MOU signed with the governor, the state would buy Southern California Edison's transmission lines for $2.76 billion and enable the utility to sell bonds backed by ratepayers to help it recoup $3.5 billion in unrecovered wholesale power costs. This week's events will test Edison's faith in the political process and its lobbying prowess. The utility's northern California counterpart, PG&E Corp. (PCG, news, msgs) unit Pacific Gas & Electric Co., pulled out of talks with the governor and filed Chapter 11 on April 6. Lehman Brothers analyst Dan Ford said in a research note Monday that chances are good any action by lawmakers will arrive late or fall short of what's needed. "We believe odds for a speedy and palatable plan are less than 50-50," Ford wrote. Lawmakers are likely to pass a version of the MOU Edison signed with the governor, but they will be preoccupied with the need to approve a budget, he said. "We expect the timing to slip and the deal to worsen for Edison shareholders," Ford wrote. "If a modified MOU does pass both the house and senate, we believe Edison will need to determine if they can stomach the alterations, as the governor is unlikely to stop an alternative plan to protect Edison shareholders." Senate, Assembly Draft Bills Assembly Democrats led by Speaker Robert Hertzberg, D-Van Nuys, and Speaker Pro Tem Fred Keeley, D-Boulder Creek, have introduced a 79-page version of the MOU that calls for the state to purchase the utility's power lines at twice their book value, as opposed to the 2.3 times offered by Davis. Unlike the MOU, the bill doesn't indicate how much money Southern California Edison is allowed to recover. "That's very disturbing to us," Bennett said. "But at least we have a bill." The Hertzberg-Keeley bill also builds in a "haircut" for suppliers. Under the plan, funds raised by Southern California Edison on the strength of its pending sale of power lines to the state would go into a trust, from which power suppliers would be paid 70 cents on the dollar for what they're owed by the utility. Suppliers have sent differing messages on their willingness to accept less than full payment, so it's unclear how they'd react to such a provision. In the Senate, Sen. Byron Sher, D-Stanford, and Sen. Steve Peace, D-Chula Vista, were crafting their own proposal in hopes of voting on and passing a bill Tuesday, aides to both lawmakers said. The Senate proposal aims to help the utility recover $3.5 billion in wholesale power costs. Large businesses would responsible for paying $2 billion through a surcharge added to their rates, although that provision faces heavy opposition from business groups. Generators would be required to contribute $300 million by accepting just 70 cents on the dollar for the $1 billion they're owed. The remainder would be covered by $1.2 billion in payments from the parent to the utility. The proposal doesn't include the state purchase of the utility's transmission lines envisaged in the deal struck by the governor, but does include an option for the state to buy the lines at book value if the utility hasn't returned to creditworthiness by Dec. 31, 2002. Edison executives said they were concerned about the required payment for the parent, saying Edison International's funds have dried up. -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com
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