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---------------------- Forwarded by Carla Hoffman/PDX/ECT on 12/21/2000 09:31
AM --------------------------- Enron Capital & Trade Resources Corp. From: "Pergher, Gunther" <Gunther.Pergher@dowjones.com< 12/21/2000 07:43 AM To: undisclosed-recipients:; cc: Subject: DJ PG&E: Util Has "Virtually Exhausted" Financial Resources 14:05 GMT 21 December 2000 DJ PG&E: Util Has "Virtually Exhausted" Financial Resources (This article was originally published Wednesday) NEW YORK (Dow Jones)--With rate hike negotiations at a standstill and forward supply talks in Washington yielding nothing, PG&E Corp.'s (PCG) regulated utility subsidiary Pacific Gas and Electric Co. reiterated Wednesday that it has "virtually exhausted its financial resources." "We have been borrowing an average of $1 million per hour to pay for the power we deliver to Californians," utility president Gordon Smith said in a press release. "No company can continue to operate indefinitely under such conditions." Since May, PG&E has spent about $5 billion more on electricity than it gets paid by its customers, but about a third of that amount has been paid into a PG&E account for profits from the generators it still owns. The generation profits, which for now are kept separate from other revenues, are expected to be used to pay down the utility's debt. PG&E and Edison International's (EIX) Southern California Edison have said for two weeks that they could go bankrupt if they don't get a rate increase immediately. Almost all of the utilities' bonds are recourse to the parent companies. Standard & Poor's analysts said Wednesday that the utilities' bonds will be downgraded severely and immediately if a rate increase isn't agreed to this week. "Today's S&P conference call sends a message to Governor Davis and California's leadership that now is the time for action," Smith said. "The governor and the California Public Utilities Commission ultimately will determine if Pacific Gas and Electric Company can continue to provide essential services to the 14 million Californians in PG&E's service territory." The state's Public Utilities Commission is scheduled to meet Thursday on the issue, and has listed on its agenda the possibility of increasing the utilities' rates. California Gov. Gray Davis, state lawmakers and utility executives were also working on a deal. Those discussions were at a stalemate. There were no talks Wednesday, Davis spokesman Steve Maviglio said, but the governor updated financial analysts that consumers are inevitably going to face a rate hike. Customers pay PG&E $54/MWh for energy, while SCE gets $66/MWh. Both companies are paid additionally for transmission and distribution. The utilities have told Davis that they need at least $20/MWh - a rate increase of about 20% - more for electricity, but the governor wants to keep the increase to about 10% of rates S&P analysts said a 10% increase wouldn't be enough to keep the utilities from defaulting, but the governor's office said an agreement wasn't likely to be reached soon. "There's not going to be a percentage deal announced," Maviglio said. "We're going to ask for greater scrutiny of the utilities' claims." Consumer groups dismissed the utilities' talk of bankruptcy as "crying wolf." "Edison wouldn't have issued a dividend on preferred stock last week if they were going bankrupt," said Doug Heller of the Foundation for Taxpayer and Consumer Rights. But if they are really going bankrupt, the state should let them, Heller said. "Better a buyout than a bailout," Heller said. "They're not going bankrupt. But if they do, the better outcome would be a public power system. Under deregulation, (their inefficiency) it only gets worse." Also Wednesday, negotiations on long-term supply contracts with western U.S. electricity suppliers ordered by the Federal Energy Regulatory Commission adjourned with little progress. Such deals could have rescued the utilities from the astronomical prices of the spot market, where power has been trading at $250 a megawatt-hour to $600/MWh. Five-year supply contracts starting Jan. 1 have been trading at about $80/MWh. -By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com (END) Dow Jones Newswires 12-21-00 0905EST Copyright © 2000, Dow Jones & Company Inc G_nther A. Pergher Senior Analyst Dow Jones & Company Inc. Tel. 609.520.7067 Fax. 609.452.3531 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer.
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