california update 3 / 01 / 01 according to a source who attended a private dinner last night with gov . davis in nyc :
1 . davis tried to express confidence on a positive outcome for the california situation , but when repeatedly pressed , continually failed to point to specific reasons for optimism .
- most of the long - term contracts the state has signed are strictly " in principle " with no details .
- all of the long - term contracts the state has signed have an april 9 th escape clause .
- a deal with pg & e on a transmission purchase is at least 30 days away , and thus far pg & e has not agreed to anything in the negotiations .
- davis is " terrified " that a third party will bid on the transmission assets .
2 . the state financial picture is worsening .
- in davis ' s " quixotic " quest to avoid rate hikes , the state is spending $ 40 - $ 50 million per day to keep the lights on , buying power through the california department of water and resources .
- if a deal is not reached by summer , these costs would rise to $ 75 - 80 million per day .
- the state has already used $ 3 billion of the $ 10 billion allocated for the power crisis and if this trend continues the state ' s surplus could be in jeopardy . if the state switches to a deficit , its shaky credit rating could result in an expensive nightmare scenario for davis , including state tax increases , cuts to core state services and electricity rate increases .
3 . davis was less emphatic about avoiding bankruptcy
- davis told our source that he " could understand " why pg & e would prefer bankruptcy to other options , such as the transmission sale .
- the source believed that davis is hoping that bankruptcy court or the la federal court hearing in front of judge lew on march 5 th will again provide davis with political cover for rate hikes .
meanwhile , a sacramento based source reports that :
1 . ferc chairman curt hebert is determined to " find " regulatory authority over the transmission line purchase proposal by davis .
- ferc involvement could postpone resolution of the current edison and prospective pg & e deals .
- hebert would use ferc ' s reciprocal agreements with other publicly owned utilities as a basis for exerting jurisdiction over the proposed california power authority .
2 . the legislature continues to lose faith in davis .
- the democrat caucus is concerned about state finances and the likelihood of rate increases .
- the republican caucus sees a political opportunity in portraying davis as wasting time on the transmission asset purchase proposal , rather than dealing with more direct solutions to the crisis .
- both the democrats and republicans are concerned that davis ' s plan will not work and all agree that there is no way around increased rates . even if a transmission asset deal goes through , the state will still be on the hook for $ 40 - $ 50 million per day for power purchases .
- ab ix requires that the money spent by dwr be repaid to the general fund . however , because it may be a while before the revenue bonds are issued , the legislative analyst office ( lao ) noted cash flow concerns . the department of finance expects to have revenue bonds issued by mid to late may .
california update 3 / 01 / 01
according to a source who attended a private dinner last night with gov . davis in nyc :
1 . davis tried to express confidence on a positive outcome for the california situation , but when repeatedly pressed , continually failed to point to specific reasons for optimism .
- most of the long - term contracts the state has signed are strictly " in principle " with no details .
- all of the long - term contracts the state has signed have an april 9 th escape clause .
- a deal with pg & e on a transmission purchase is at least 30 days away , and thus far pg & e has not agreed to anything in the negotiations .
- davis is " terrified " that a third party will bid on the transmission assets .
2 . the state financial picture is worsening .
- in davis ' s " quixotic " quest to avoid rate hikes , the state is spending $ 40 - $ 50 million per day to keep the lights on , buying power through the california department of water and resources .
- if a deal is not reached by summer , these costs would rise to $ 75 - 80 million per day .
- the state has already used $ 3 billion of the $ 10 billion allocated for the power crisis and if this trend continues the state ' s surplus could be in jeopardy . if the state switches to a deficit , its shaky credit rating could result in an expensive nightmare scenario for davis , including state tax increases , cuts to core state services and electricity rate increases .
3 . davis was less emphatic about avoiding bankruptcy
- davis told our source that he " could understand " why pg & e would prefer bankruptcy to other options , such as the transmission sale .
- the source believed that davis is hoping that bankruptcy court or the la federal court hearing in front of judge lew on march 5 th will again provide davis with political cover for rate hikes .
meanwhile , a sacramento based source reports that :
1 . ferc chairman curt hebert is determined to " find " regulatory authority over the transmission line purchase proposal by davis .
- ferc involvement could postpone resolution of the current edison and prospective pg & e deals .
- hebert would use ferc ' s reciprocal agreements with other publicly owned utilities as a basis for exerting jurisdiction over the proposed california power authority .
2 . the legislature continues to lose faith in davis .
- the democrat caucus is concerned about state finances and the likelihood of rate increases .
- the republican caucus sees a political opportunity in portraying davis as wasting time on the transmission asset purchase proposal , rather than dealing with more direct solutions to the crisis .
- both the democrats and republicans are concerned that davis ' s plan will not work and all agree that there is no way around increased rates . even if a transmission asset deal goes through , the state will still be on the hook for $ 40 - $ 50 million per day for power purchases .
- ab ix requires that the money spent by dwr be repaid to the general fund . however , because it may be a while before the revenue bonds are issued , the legislative analyst office ( lao ) noted cash flow concerns . the department of finance expects to have revenue bonds issued by mid to late may .