california update 8 / 20 / 01 executive summary
? legislators prepare to address socal bailout options
? $ 5 . 7 b revenue notes request in state treasurer ' s hands
bonds & bankruptcy :
the edison mou is expected to be the major issue on the political agenda this week , and the legislative leadership wants to pass some bail - out measure by this friday ( 8 / 24 ) . while analysts are confident that there will be an mou passed , many are skeptical that the current proposals will be able to cobble together 41 votes in the assembly . the davis administration has said proceeds from the november bond sale will be used to repay the $ 6 . 2 b borrowed from general fund to purchase energy . however , repeated delays in the bond sale have caused concern . and pg & e is upset that the money will be first used to pay off the state without offsetting some of the funds the state owes pg & e .
assembly republican leader dave cox has said that his members will not vote for any plan that is not a clean bailout ( i . e . without additional provisions related to environmental mitigation ) . thus , he is essentially saying his members will vote for assembly member rod wright ' s proposal , and no other current plan . but wright ' s proposal does not have much support from democrats . sources report that at least one prominent legislator , senator mike machado , has apparently remarked that he is not certain of the need to pass an mou . others may be muttering similar things , but an mou is still likely .
strangely , though , no discussions were held at the staff level this week on mou legislation . the key driver in the mou debate is how much of a " haircut " sce will be required to take ( as a hit to the parent company ) . sources report that sce will accept a haircut of $ 500 m . however , should the haircut be placed in the range of $ 1 b , we are told that sce ' s bryson has informed his team that he would take sce into bankruptcy voluntarily . this represents a significant turnaround in sce ' s previous optimism , which is attributable to legislative indifference to the sce bankruptcy threat as well as growing tension between bryson and governor davis . as for the middle range between $ 500 m and $ 1 b , it is difficult to ascertain how high sce will go before pulling the bankruptcy trigger .
short term - anticipatory notes
state controller kathleen connell has asked for an emergency sale of a $ 5 . 7 b short term note ( possibly in the form of a revenue anticipation note / ran ) to cover california ' s electricity costs until november , when $ 12 . 4 b in state bonds are expected to be issue by the legislature . the state controller ' s request was made because of her legal obligation to issue a demand to the treasurer at any time she determines that the general fund has or will have insufficient funds for the payment of all appropriations by the legislature . connell claims the ran , which could be offered as early as september , is necessary because the state ' s general fund is running dry from recent power purchases .
state treasurer angelides is studying the plan , but has yet to publicly comment . according to sources , he has also yet to comment to legislators , but was in new york last week meeting with people on wall street about the bond issuance . mandated by state statute , angelides can issue these notes unilaterally and does not need approval from the legislature or anyone else . he has total discretion on the issuance , its timing , and its amount . however , the state ' s general fund would not be depleted by november 15 th , even without the ran revenue . rans are not that unusual . rans were previously issued from fy 95 - 96 through fy 99 - 00 with the largest being the $ 5 b ran in fy 92 - 93 . because of california ' s recent economic growth , rans were not necessary last year and were expected to be unnecessary this year .
concerns surrounding the pg & e suit filed earlier last week ( pg & e seeks priority in the $ 12 b revenue bond allocations ) are somewhat eased by a well - placed utility source who report that the suit will have little impact the revenue bond or anticipatory notes ' issuance . however , there is suspicion among some that the administration is increasingly concerned that investor confidence is weakening and that the bond issuance might be deemed a failure , and is thus promoting the idea that pg & e ' s actions are responsible , rather than investor uncertainty over revenue stream allocation and dwr contracts . in the event that the revenue bonds ' issuance is delayed past the october 31 st bridge loan maturity , the interest rate charged to the state would reportedly jump from four percent to seven percent .
california update 8 / 20 / 01
executive summary
? legislators prepare to address socal bailout options
? $ 5 . 7 b revenue notes request in state treasurer ' s hands
bonds & bankruptcy :
the edison mou is expected to be the major issue on the political agenda this week , and the legislative leadership wants to pass some bail - out measure by this friday ( 8 / 24 ) . while analysts are confident that there will be an mou passed , many are skeptical that the current proposals will be able to cobble together 41 votes in the assembly . the davis administration has said proceeds from the november bond sale will be used to repay the $ 6 . 2 b borrowed from general fund to purchase energy . however , repeated delays in the bond sale have caused concern . and pg & e is upset that the money will be first used to pay off the state without offsetting some of the funds the state owes pg & e .
assembly republican leader dave cox has said that his members will not vote for any plan that is not a clean bailout ( i . e . without additional provisions related to environmental mitigation ) . thus , he is essentially saying his members will vote for assembly member rod wright ' s proposal , and no other current plan . but wright ' s proposal does not have much support from democrats . sources report that at least one prominent legislator , senator mike machado , has apparently remarked that he is not certain of the need to pass an mou . others may be muttering similar things , but an mou is still likely .
strangely , though , no discussions were held at the staff level this week on mou legislation . the key driver in the mou debate is how much of a " haircut " sce will be required to take ( as a hit to the parent company ) . sources report that sce will accept a haircut of $ 500 m . however , should the haircut be placed in the range of $ 1 b , we are told that sce ' s bryson has informed his team that he would take sce into bankruptcy voluntarily . this represents a significant turnaround in sce ' s previous optimism , which is attributable to legislative indifference to the sce bankruptcy threat as well as growing tension between bryson and governor davis . as for the middle range between $ 500 m and $ 1 b , it is difficult to ascertain how high sce will go before pulling the bankruptcy trigger .
short term - anticipatory notes
state controller kathleen connell has asked for an emergency sale of a $ 5 . 7 b short term note ( possibly in the form of a revenue anticipation note / ran ) to cover california ' s electricity costs until november , when $ 12 . 4 b in state bonds are expected to be issue by the legislature . the state controller ' s request was made because of her legal obligation to issue a demand to the treasurer at any time she determines that the general fund has or will have insufficient funds for the payment of all appropriations by the legislature . connell claims the ran , which could be offered as early as september , is necessary because the state ' s general fund is running dry from recent power purchases .
state treasurer angelides is studying the plan , but has yet to publicly comment . according to sources , he has also yet to comment to legislators , but was in new york last week meeting with people on wall street about the bond issuance . mandated by state statute , angelides can issue these notes unilaterally and does not need approval from the legislature or anyone else . he has total discretion on the issuance , its timing , and its amount . however , the state ' s general fund would not be depleted by november 15 th , even without the ran revenue . rans are not that unusual . rans were previously issued from fy 95 - 96 through fy 99 - 00 with the largest being the $ 5 b ran in fy 92 - 93 . because of california ' s recent economic growth , rans were not necessary last year and were expected to be unnecessary this year .
concerns surrounding the pg & e suit filed earlier last week ( pg & e seeks priority in the $ 12 b revenue bond allocations ) are somewhat eased by a well - placed utility source who report that the suit will have little impact the revenue bond or anticipatory notes ' issuance . however , there is suspicion among some that the administration is increasingly concerned that investor confidence is weakening and that the bond issuance might be deemed a failure , and is thus promoting the idea that pg & e ' s actions are responsible , rather than investor uncertainty over revenue stream allocation and dwr contracts . in the event that the revenue bonds ' issuance is delayed past the october 31 st bridge loan maturity , the interest rate charged to the state would reportedly jump from four percent to seven percent .