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Enron Mail |
Executive Summary
Edison's MOU Condemned at this Friday's CPUC Meeting The Idle Plan Z=20 Angelides Hides State Budget Concerns=20 House Committee to Vote on Energy Relief Edison's MOU Doubtful The unusually calm settling over the California legislature about SoCal Edi= son's potential bankruptcy has finally affected the relentlessly optimistic= investment bank analysts and other company shareholders. We have reported= that through all plans from B-Z, there is not a solid plan to save this co= mpany and now executives are even more fearful that this predictions may co= me to fruition. Over the last few days, Edison executives have begun pointing hard at the C= PUC meeting this Friday as a make-or-break event for the company. The is b= ecause after the meeting, Davis's MOU plan to buy SoCal's grid will have no= chance of preventing a potential bankruptcy. This plan is essentially dea= d although Governor Daivs has yet to say this in a press releases. The fin= al nail will happen after the CPUC adjourns its Friday meeting without voti= ng on several necessary MOU provisions. Unless the CPUC makes a last minut= e, emergency - amendment to their agenda, the deal will be dead (despite S= oCal's support for letting the deal stand past its deadline). Sources indi= cate that CPUC President Loretta Lynch holds reservations on the MOU and co= ntinues to distance herself from Davis. =20 Attempting to influence policy making, Edison executives have spent the las= t few investor phone conferences warning that June 8 would see substantiall= y increased risks for a creditor-induced bankruptcy if the Davis plan dies = at CPUC. This is interesting, since no one else seems to have been focused= on the date until Edison began mentioning it late last week. However, the= re is no more or less threat of bankruptcy than there is now or will be in = two weeks. As reported several times earlier, most everyone had given up = on the MOU long before this Friday's CPUC meeting. Plan Z Shows Little Progress Meanwhile, the unhurried pace toward a Plan Z that we reported last Friday,= has gained little progress. Legislators continue to pin-point a plan that= will secure re-election votes and at the same time, weigh the need for rat= e hikes for California's corporate and home electricity users. As they has= h it out, the state is spending even more on electricity purchases. In spi= te of better than expected levels of conservation, the state's electricity = expenditures over the last month rose to an average of $79M/day. The recent= rate increases mean more spending by the state and that calls into questio= n the reassuring Angelides scenario for California's budget prospects later= this year. The California Budget Crunch Even more worrisome than a idle Plan Z is increasing evidence that last mon= th's conference call with State Treasurer Angelides was a little misleading= . During that conference call Angelides claimed that State Comptroller Conn= ell and many in the financial committee had the numbers wrong. Angelides a= rgued that $7.2B already spent to buy power since January was really the to= tal amount of authorized spending through late August. In fact, he said on= ly $4.3B of that had been "spent." Sources now indicate that Angelides wa= s technically correct if you use "spent" to mean only the amount of money f= or which checks had been written. This is different than the amount of mon= ey California had already promised to energy suppliers who had already supp= lied energy to the state. In fact, when Angelides was speaking the state h= ad in fact already promised to pay $7B for energy it had already consumed (= the total committed has topped $8B.) By the time the state gets its "power= bonds" auctioned in August, they will have already spent all $12B and be b= ack to dipping into the General Fund. The idea of RANs being auctioned be= fore the power bonds get issued is still an option if the general fund does= n't make it to August.=20 The nearest answer to both of these cash flow deficits lies in part in the = painful process that the legislature is undertaking now - another round of = huge electricity rate hikes to securitize debt issuance. Then the hope is = that those hikes bridge the gap between now and when new capacity brings wh= olesale rates down and the debts can be repaid. The only near term path t= o bringing generating assets on line immediately is the 3,500 MW from QF pl= ants which are off line because of cash flow problems. Settling their need= s is wrapped up in settling the PG&E and Edison trade creditor issues, whic= h makes the legislature's leisurely approach to the rate hike/haircut situa= tion all the more troublesome. Energy Relief The House Energy & Commerce Committee is scheduled to vote on H.R. 1647 (th= e Emergency Electricity Relief Act) tomorrow at 10:00 am. The bill which w= as twice postponed and does not include any provisions on price caps, but d= uring the course of the mark-up, sources indicate that it is possible, even= likely, that a Democrat could offer a price cap amendment. Rep. Waxman (D= -CA) offered a price cap amendment at an earlier mark-up of the bill at the= subcommittee level. The Waxman amendment was rejected along party lines (= all Republicans and 2 Democrats voted nay). Sources inside Joe Barton's of= fice report that staff and members have been meeting to work out a compromi= se on the price cap issue, but nothing has been resolved. As of this aftern= oon, those discussions have been terminated in favor of an open discourse i= n the Committee tomorrow. Since an agreement was not reached, compromise l= anguage is not expected to be offered as an amendment tomorrow. If it is, = it would not be something that leaders on the Republican and Democrat sides= have crafted together and therefore would not likely pass. Sources indica= te that the committee does expect Waxman, and possibly others to offer pric= e cap language, but it is not expected to pass.
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