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Enron Mail |
FYI
----- Forwarded by Robert Neustaedter/ENRON_DEVELOPMENT on 05/11/2001 09:30 AM ----- "Roger Yang" <ryy@mrwassoc.com< 05/10/2001 06:56 PM To: Robert.Neustaedter@enron.com cc: Subject: Update on Securitization Robert, The following is an update of bond issues for California: The SCE MOU would allow SCE to issue bonds to recover $2 billion in 15 year bonds; SB 1X 31 would allow DWR to issue bonds to recover $13.4 billion in purchases for 2001; and Under a similar ratemaking treatment and transmission purchase agreement in the SCE MOU for PG&E, PG&E would need to issue $4 billion in bonds. This would result in over $6 billion in bonds for PG&E and SCE undercollections through January 31, 2001. The $13.4 billion in bonds for DWR appears reasonable to the extent that the FERC soft price caps recently approved by the FERC does not result in market prices that exceed $300 per MWH and gas prices used to determine QF prices average $7.4 per mmbtu.? Also, the reasonableness of the $13.4 billion is also predicated on QFs generating their full capability under their QF contracts.? These conditions do not appear to be materializing.? However, conservation impacts and recently approved CPUC retail rate increases may decrease demand to lower costs by lowering the overall net short for the utilities. In terms of other benchmarks for assessing the reasonableness of the $13.4 billion amount, the CPUC proposed decision in the rate design proceeding cites that DWR expects to incur $9.2 billion for PG&E, SCE, and SDG&E through June 2001.? If we extrapolate this number to $18.4 billion for all of 2001 and subtract out $3.3 billion for the rate increases for PG&E and SCE that is expected for the remaining year, the result is $15.1 billion that would need to be securitized.? However, SDG&E will also be contributing revenues to reduce the net amount needed to be securitized.? Putting this all together, demonstrates that the $13.4 billion could be a reasonable amount and any additional shortfalls would need to be funded through the State's general fund surplus.? The issue of using State surpluses in lieu of securitization was an issue in the legislature that prevented Republican support for a super-majority approval.? It looks at the end of the day, both securitization and the use of the State's surplus will be needed to fund the revenue shortfalls in 2001 and both Democrat and Republican solutions will eventually be implemented. Roger??
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