"Plan B" Starting to Get Notice in Sacramento

From the Dow Jones Newswire:

< SoCal Ed May Be Near Financial Solvency With 'Plan B'
<
< LOS ANGELES (Dow Jones)--Legislators in California are beginning to
< embrace
< an alternative energy plan, expected to be introduced as a bill this week,
< that would get the state out of the power buying business in as little as
< six
< months and restore Edison International's (EIX) Southern California Edison
< unit to financial solvency without requiring the utility to sell any of
< its
< assets to the state.
< If the plan wins the support of both houses of the Legislature,
< lawmakers
< hope it will also convince a bankruptcy court judge in San Francisco that
< it
< can be used to lift PG&E Corp.'s (PCG) Pacific Gas & Electric unit out of
< Chapter 11 bankruptcy protection.
< "Clearly this would be a positive development," said Paul Patterson, a
< utility analyst with Credit Suisse First Boston in New York. "It would
< offer a
< way to restore the utilities to financial viability. We've noticed over
< the
< weekend that the situation in the Assembly is improving."
< The proposal by Assemblyman Joe Nation, D-San Rafael and Assemblyman
< John
< Dutra, D-Fremont, has gained the interest of some members of the Assembly
< Republican Caucus, all of whom have resisted previous attempts at
< rescuing
< SoCal Ed from near bankruptcy.
< Consumer groups have been resistant to any form of what they call a
< utility
< "bailout." But a spokesman at The Utility Reform Network in San Francisco
< said
< the group is studying the 'Plan B' proposal.
< On Friday, a spokesman to Gov. Gray Davis said state Sen. Richard
< Polanco,
< the Senate Majority Leader, would introduce legislation this week enacting
< the
< agreement the governor reached with SoCal Ed exactly one month ago that
< would
< allow the utility to issue about $3 billion in bonds to recoup its
< unrecovered
< power costs and sell its power lines to the state for $2.76 billion to pay
< off
< its debt.
< But Nation and Dutra, members of the so-called 'Plan B' group, are
< looking
< to alter that agreement.
< "There are a lot of people who question the validity of buying the grid"
< from SoCal Ed," Nation, an economist by trade, said. "I think there is an
< understanding that the existing (memorandum of understanding) won't pass."
<
< One of the problems with having the state purchase the grid at this
< point is
< that there won't be enough funds available to maintain and upgrade the
< lines
< to improve the flow of electricity, according to several members of the
< Senate
< Budget Committee.
< "We're preparing for massive budget cuts this week because of this
< electricity crisis," the member of the Senate Budget Committee said.
< - -
< Plan Eliminates Purchase Of SoCal Ed's Power Lines
<
< Nation's proposal calls for the state to hold a five-year option to buy
< SoCal Ed's transmission lines for its book value price of $1.2 billion,
< and
< eliminate a provision that would ease the regulation of the utility by the
< California Public Utilities Commission
< In exchange, SoCal Ed can securitize a larger portion of its $5.5
< billion in
< unrecovered power costs backed by a larger dedicated rate component.
< Moreover, the utility would sell the state additional power at a cost
< beyond
< the 10 years already agreed upon in the memorandum-of-understanding and
< additional power from other company sources.
< Nation also wants to set up a ratepayer revenue account to refund
< consumers
< if generators agree to accept less than 100 cents on the dollar. He said,
< however, he does not plan to include a provision in any legislation that
< states generators must take a "haircut" on money the companies claim they
< are
< owed by SoCal Ed.
< Republicans, including Assemblyman George Runner, R-Lancaster, and
< Assemblyman Keith Richman, R-Granada Hills, have been working closely with
< Nation and the 'Plan B' group. Jamie Fisfis, a spokesman for the Assembly
< Republican Caucus said the caucus is not yet ready to support the plan,
< but
< Republicans are "happy" they are being included in the discussions.
< "We have two criteria when we evaluate the plan," Fisfis said. "The plan
< has
< to keep power rates as low as possible and puts more supply into the
< grid."
< Steve Maviglio, Davis' press secretary, said the governor "has always
< said
< he's open to improvements" in the memorandum-of-understanding.
< "But it has to remain a balanced transaction," Maviglio said.
< Nation, a member of the Assembly since 2000, said the state would only
< have
< to spend a couple of weeks renegotiating the memorandum-of-understanding
< with
< Edison and that it could likely win a two-thirds majority vote in the
< Assembly
< shortly after that.
< Nation said he has had a number of conversations with Edison
< International
< executives on his proposal and "they have been generally receptive because
< they believe the agreement with the governor won't pass."
< A SoCal Ed spokesman was unavailable for comment.
< Lawmakers Seeking Quick Exit From Power Buying Business
<
< California has committed $7.2 billion of its roughly $8 billion general
< fund
< buying power since January on behalf of PG&E, SoCal Ed and Sempra Energy's
< (SRE) San Diego Gas & Electric unit.
< But several lawmakers and one of Davis' financial advisers said Sunday
< that
< the state wants to desperately get out of the power buying business soon
< because of the economic impact the energy spending will likely have on
< education, transportation and other state programs.
< "We are beginning to realize that if we don't get out of the business of
< buying electricity, we will be in the same boat as the utilities," said
< one
< state Senator who is also a member of the Senate Budget Committee.
< Nation agreed, saying "the best thing we can do for California is get
< out of
< this mess we're in. We need to get the DWR out of the business of buying
< power."
<
< Lawmakers Working To Keep SoCal Ed Out Of Bankruptcy
<
< A number of Democrats in the Assembly, who have said SoCal Ed may be
< better
< off in bankruptcy, now want to see the utility remain solvent, Nation
< said.
< "I think several months ago bankruptcy wouldn't have seemed like such a
< challenge," Nation said.
< Nation said he fears that if SoCal Ed were in a bankruptcy setting, the
< state's so-called qualifying facilities, renewable and gas fired power
< plants
< that contract directly with the utilities, may win the right to sell their
< cheap power on the open market.
< "If that happens, it will dramatically raise the risk to the state
< because
< we will be forced to buy that power," Nation said. "I think people
< understand
< what the risks are and that's a real danger."
<
< -By Jason Leopold; Dow Jones Newswires; 323-658-3874;