california 2 / 13 for questions contact robert johnston at x 39934 .
court case denies rate hikes
as forecast in our report yesterday , the federal court in los angeles refused to allow the two california utilities to raise rates to recoup undercollections of their power costs since last august . we had expected that the court would rule in favor of the utilities , but push the rate hike question to an appeals court . instead , judge ronald lew refused to rule on the case because of technical considerations and postponed a hearing until march 5 th . the utilities now face an imminent end to creditor forbearance without the prospect of short - term rate hikes . edison reaches the end of its grace period for a $ 200 million payment today and a $ 600 million payment on thursday . absent the political cover of the court to impose rate hikes , the governor and the state legislature are in an equally tenuous position .
bankruptcy grows more likely
regardless of the legal technicalities , the bottom line is the same . as we have cautioned since last wednesday , there is a serious risk that a creditor or
group of creditors could push for bankruptcy , perhapsas soon as tomorrow when the period of forbearance agreed to by financial creditors runs out .
before this ruling , there was reasonable assurance that the utilities would be restored to health by their court victory . now there is real fear a coherent deal is
unravelling , and that it will not take much for a small group of financial creditors to break ranks . and the prospects for supplier creditors now look
much bleaker and more dangerous . and there is an increased temptation for the utilities to declare bankruptcy and take their chances with a judge rather
than the california assembly . the politicians will try to find a way to prevent bankruptcy , but it will now be difficult .
disarray in the legislature
for now , the only card still being played is the " i give you a dollar , you give me a hot dog " plan , as state senator burton accurately summed it up . the state
pumps money into the utilities in return for some kind of asset - - warrants , transmission lines , whatever , anything that can be brandished in front of the voters as
proof that the utilities suffered and paid . but " there is little or no energy among legislators for either of the proposed solutions , " one senior figure in sacramento
told our source yesterday afternoon . " legislators are running scared . and i don ' t know of a single legislator in either house , on either side , who has the slightest
sympathy for the utiltiies now . they think the utiltiies have either been incompetent or shrewd or both . " the ruling will in all likelihood send officials back to the
drawing board . " davis will propose a kind of shadow plan by friday , but there will be no real substance in it . what are we supposed to do in just four
days ? there will not be a real substantive plan for three weeks , i think , at the earliest . " that period of uncertainty and lack of energy in the legislature could
panic the creditors now .
bankruptcy court
if davis fails to cobble together a last - minute deal for rate hikes and some kind of purchase of transmission assets , then all parties will have to do a workout
in federal bankruptcy court . the most likely scenario ( which we flagged last week ) is that the small ipps file an involuntary bankruptcy against edison , followed
possibly by pg & e . involuntary bankruptcy would shield the utilities from creditor lawsuits and temporarily relieve them from debt payments . there is also
speculation in the press this morning that some creditors are talking about a ch . 7 or liquidation proceeding , but that cannot yet be confirmed by sources .
california 2 / 13
for questions contact robert johnston at x 39934 .
court case denies rate hikes
as forecast in our report yesterday , the federal court in los angeles refused to allow the two california utilities to raise rates to recoup undercollections of their power costs since last august . we had expected that the court would rule in favor of the utilities , but push the rate hike question to an appeals court . instead , judge ronald lew refused to rule on the case because of technical considerations and postponed a hearing until march 5 th . the utilities now face an imminent end to creditor forbearance without the prospect of short - term rate hikes . edison reaches the end of its grace period for a $ 200 million payment today and a $ 600 million payment on thursday . absent the political cover of the court to impose rate hikes , the governor and the state legislature are in an equally tenuous position .
bankruptcy grows more likely
regardless of the legal technicalities , the bottom line is the same . as we have cautioned since last wednesday , there is a serious risk that a creditor or
group of creditors could push for bankruptcy , perhapsas soon as tomorrow when the period of forbearance agreed to by financial creditors runs out .
before this ruling , there was reasonable assurance that the utilities would be restored to health by their court victory . now there is real fear a coherent deal is
unravelling , and that it will not take much for a small group of financial creditors to break ranks . and the prospects for supplier creditors now look
much bleaker and more dangerous . and there is an increased temptation for the utilities to declare bankruptcy and take their chances with a judge rather
than the california assembly . the politicians will try to find a way to prevent bankruptcy , but it will now be difficult .
disarray in the legislature
for now , the only card still being played is the " i give you a dollar , you give me a hot dog " plan , as state senator burton accurately summed it up . the state
pumps money into the utilities in return for some kind of asset - - warrants , transmission lines , whatever , anything that can be brandished in front of the voters as
proof that the utilities suffered and paid . but " there is little or no energy among legislators for either of the proposed solutions , " one senior figure in sacramento
told our source yesterday afternoon . " legislators are running scared . and i don ' t know of a single legislator in either house , on either side , who has the slightest
sympathy for the utiltiies now . they think the utiltiies have either been incompetent or shrewd or both . " the ruling will in all likelihood send officials back to the
drawing board . " davis will propose a kind of shadow plan by friday , but there will be no real substance in it . what are we supposed to do in just four
days ? there will not be a real substantive plan for three weeks , i think , at the earliest . " that period of uncertainty and lack of energy in the legislature could
panic the creditors now .
bankruptcy court
if davis fails to cobble together a last - minute deal for rate hikes and some kind of purchase of transmission assets , then all parties will have to do a workout
in federal bankruptcy court . the most likely scenario ( which we flagged last week ) is that the small ipps file an involuntary bankruptcy against edison , followed
possibly by pg & e . involuntary bankruptcy would shield the utilities from creditor lawsuits and temporarily relieve them from debt payments . there is also
speculation in the press this morning that some creditors are talking about a ch . 7 or liquidation proceeding , but that cannot yet be confirmed by sources .