california 6 / 13 executive summary
- cpuc rules that socal must pay 15 % of debt to qfs ( approximately $ 50 million )
- ruling heightens likelihood of voluntary bankruptcy filing by socal
- voluntary filing further heightened by successful ring - fencing by eix parent
- bankruptcy judge firm in support for qfs
report
1 . socal loses cpuc ruling , but retains appeal option
as you may have seen , bloomberg reported that the cpuc voted 5 - 0 to force socal to make 15 % of its payments owed to alternative energy producers in california . cpuc rules allow 30 days to appeal its rulings , leaving a window open for socal to buy more time .
2 . voluntary filing in ?
with regard to a socal bankruptcy filing , the key now is how socal ' s board
feels about progress rather than deadlines with creditors . in other words ,
sources believe that a voluntary filing is more likely than an involuntary
filing . a continuing lack of progress on a bailout and an increase in the
number of liens filed against socal is more likely to make the socal board
want to file for bankrutpcy voluntarily . the recent ring - fencing by edison
international reflects their need to pay off cross - default risk and to cut ties
in their bank facility between the parent company and lines of credit helds by socal .
in and of outself , it does not necessarily signal an imminent filing .
3 . involuntary out ?
sources indicate that the unsecured financial creditors are not
considering a filing against socal . this is because the financial creditors
believe that they would still be worse off in bankruptcy . sources report
that in creditor discussions , there has not been talk of the debt holders
not being paid . " people have talked about screwing the generators and
everyone else , but not the debt holders , " a source commented .
the qfs are unlikely to file against socal because they have fairly good
contracts in place . also , they receive high capacity fees in the summer
( these fees vary seasonally and are distinct from generating fees ) . these
capacity fees are calculated on a rolling , 4 - year basis and will be
re - calculated next year . the qfs want this summer included in the
recalculation , incentivizing them to keep their contracts in place .
4 . montali supporting qfs
judge montali , by his recent rulings , is sending a signal that he is
concerned for the qfs and is sensitive to their hardships . he is trying to
help them through his rulings . for example , as long as qfs remain on line ,
those who petition can receive additional payments from pg & e . over a
4 - month period , these payments equal 20 % of the qfs ' pre - petition claims .
this provides the qfs incentive to remain connected to pg & e .
5 . ge looking to restructure generating capacity financing
general electric is reportedly " deeply concerned " about the stability of
financing generating capacity in the us . ( ge has over 70 % of the gas
turbine market . ) ge is reportedly trying to keep its margins down and is
not raising its prices due to concerns about instability . sources believe
that a very significant percentage of generating capacity financing will
have to be restrucured in five years .