california update 6 / 22 / 01 executive summary
? state budget discussions deteriorating - bonds issuance jeopardized
? pg & e bankruptcy advisor comments on socal
budget & bond concerns
sources report that discussions within the state ' s budget conference committee have completely disintegrated . although last tuesday ' s tentative $ 2 . 7 b reserve agreement between the parties offered some hope to the situation , republicans have since completely broken with democrats and are begging for a number nearly half of the previously agreed amount . the legislative recess is scheduled to begin july 20 th , and prior to the davis administration , the legislature very rarely took month - long recesses due to the budget battle ( there usually was a democrat - controlled legislature and a republican governor ) . sources report that if legislators take leave without a budget resolution , it would most likely compromise their ability to pass the budget and mou , before the mou ' s deadline of aug . 15 th .
sources also indicate that delays in establishing the state ' s budget could prompt wall street investors to once again downgrade california credit rating . a lowered rating could complicate the $ 12 b bond issuance the state expects to offer in late september 2001 by forcing the state to offer a higher rate of return , which could mean fewer bonds . sources recently conducted a private interview with parties close to david wiggs , head of the la department of water & power , ( dwp is in constant contact with both socal and pg & e and is a creditor of both utilities and the dwr . - - wiggs is close to and in constant contact with governor davis , hertzberg and burton , and he knows every other state official relevant to energy issues ) . wiggs ' position on the bonds and socal follows :
? the state is " really worried " about the bond issuance . the state believes it can sell $ 3 b in bonds now , but as for $ 11 - $ 12 b , they are " not confident . " the state is currently trying to put its revenue streams in place , then it will have to prep wall street regarding the revenue streams .
? wiggs saw treasurer angelides wednesday ( 6 / 20 ) and told him that , " i wouldn ' t buy these bonds . " wiggs stated that , " there is not a clear enough path for those rates . "
? wiggs was hertzberg ' s advisor on energy . he was also at el paso ( energy company , not gas company ) during its bankruptcy . wiggs commented that he is worried because he lives in socal territory rather than dwr territory .
? both wiggs and his dwr staff believe that an mou / plan b deal will not pass . they are not thinking in terms of counting votes , but rather of the very large number of things that need to be done simultaneously in order to make a solution work .
pge advisor on socal
sources recently interview the attorney who is currently acting as bankruptcy advisor to pg & e , and may be the potential advisor to socal in bankruptcy proceedings . comment follow :
? the attorney believes that the likelihood of a socal voluntary filing is 60 to 70 % , but he does not know when it will happen . the attorney would not speculate as to the likelihood of an involuntary filing , stating that he did not know .
? concern was expressed that if a solution were passed to make socal liquid again , dwr ( under instructions from the state ) would then refuse to purchase the net short , leaving socal with a huge bill for power that it could not pay . socal would then be faced with borrowing money to pay for the bill ( an unlikely event , given their current status ) or declaring bankruptcy . the attorney commented that dwr had already tried to send power bills to pg montali refused to force pg & e to pay them . the attorney therefore believes that dwr is likely to force socal ( and pg & e if it were made solvent ) to resume paying for power as soon as possible . the attorney believes that socal is aware of this problem and that it must be taken into account as part of a bailout solution .
california update 6 / 22 / 01
executive summary
? state budget discussions deteriorating - bonds issuance jeopardized
? pg & e bankruptcy advisor comments on socal
budget & bond concerns
sources report that discussions within the state ' s budget conference committee have completely disintegrated . although last tuesday ' s tentative $ 2 . 7 b reserve agreement between the parties offered some hope to the situation , republicans have since completely broken with democrats and are begging for a number nearly half of the previously agreed amount . the legislative recess is scheduled to begin july 20 th , and prior to the davis administration , the legislature very rarely took month - long recesses due to the budget battle ( there usually was a democrat - controlled legislature and a republican governor ) . sources report that if legislators take leave without a budget resolution , it would most likely compromise their ability to pass the budget and mou , before the mou ' s deadline of aug . 15 th .
sources also indicate that delays in establishing the state ' s budget could prompt wall street investors to once again downgrade california credit rating . a lowered rating could complicate the $ 12 b bond issuance the state expects to offer in late september 2001 by forcing the state to offer a higher rate of return , which could mean fewer bonds . sources recently conducted a private interview with parties close to david wiggs , head of the la department of water & power , ( dwp is in constant contact with both socal and pg & e and is a creditor of both utilities and the dwr . - - wiggs is close to and in constant contact with governor davis , hertzberg and burton , and he knows every other state official relevant to energy issues ) . wiggs ' position on the bonds and socal follows :
? the state is " really worried " about the bond issuance . the state believes it can sell $ 3 b in bonds now , but as for $ 11 - $ 12 b , they are " not confident . " the state is currently trying to put its revenue streams in place , then it will have to prep wall street regarding the revenue streams .
? wiggs saw treasurer angelides wednesday ( 6 / 20 ) and told him that , " i wouldn ' t buy these bonds . " wiggs stated that , " there is not a clear enough path for those rates . "
? wiggs was hertzberg ' s advisor on energy . he was also at el paso ( energy company , not gas company ) during its bankruptcy . wiggs commented that he is worried because he lives in socal territory rather than dwr territory .
? both wiggs and his dwr staff believe that an mou / plan b deal will not pass . they are not thinking in terms of counting votes , but rather of the very large number of things that need to be done simultaneously in order to make a solution work .
pge advisor on socal
sources recently interview the attorney who is currently acting as bankruptcy advisor to pg & e , and may be the potential advisor to socal in bankruptcy proceedings . comment follow :
? the attorney believes that the likelihood of a socal voluntary filing is 60 to 70 % , but he does not know when it will happen . the attorney would not speculate as to the likelihood of an involuntary filing , stating that he did not know .
? concern was expressed that if a solution were passed to make socal liquid again , dwr ( under instructions from the state ) would then refuse to purchase the net short , leaving socal with a huge bill for power that it could not pay . socal would then be faced with borrowing money to pay for the bill ( an unlikely event , given their current status ) or declaring bankruptcy . the attorney commented that dwr had already tried to send power bills to pg montali refused to force pg & e to pay them . the attorney therefore believes that dwr is likely to force socal ( and pg & e if it were made solvent ) to resume paying for power as soon as possible . the attorney believes that socal is aware of this problem and that it must be taken into account as part of a bailout solution .