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EXECUTIVE SUMMARY
? California's Bond Inevitability
? Davis Faces Even Greater Financial Woes
? California's Creditor Status Debated by Court
? Windfall Profits Tax Bill (SB 1X/AB 128X) Passes Senate Vote, Davis 
expected to Sign Off

California Bond Battle
SB 31X passed the Senate today by a simple majority vote, initiating the 90 
day wait period on the revenue bonds issuance.  Sources indicate that 
contrary to media reports, a possible referendum on the SB 31X would be 
unlikely for Harvey Rosenfield to produce within 90 days due to insufficient 
funding.  He reportedly would need to raise $250,000 - $500,000 very 
quickly.  Sources believe that it is more likely that Harvey will attempt to 
set up an initiative later this year or in 2002.

Davis Financial Woes Just Beginning
It is unclear whether Governor Davis truly will be able to move money around 
within the state budget to cover power purchases until August.  Of the $13.4 
billion bond amount authorized, approximately $6.7 billion has already been 
spent on power.  It is likely that the state will spend more than the 
remaining $6.7 billion on power before the bonds are even issued.  Sources 
indicate that most of the long-term contracts Davis talks about are unsigned 
and not really in place.  This means that the state may still have to 
purchase the majority of power on the spot market, which further complicates 
the situation.  As reported earlier, this explains why the Republicans wanted 
to wait for Davis to disclose the terms of the contracts before authorizing 
the bond issuance.  Given the lack of contracts in place, it appears that the 
bridge loan and the bonds will be inadequate for all of the state's power 
purchases.

"To Be or Not to Be," Is California a Creditor? 
Sources indicate that lawyers and members of the generator community 
reviewing California's revenue bond bill SB 31X, are unclear as to whether 
the state of California has claims as a creditor.  It appears at this time, 
that the Assembly re-wrote Senator Bowen's language so that the bill relies 
on the existing interpretation of AB 1X as to when the state gets paid by the 
utilities.  This exact issue is currently being reviewed in the PG&E 
bankruptcy case and will most likely settle this ongoing dispute between 
legislatures and utilities.

Windfall Profits Tax
According to sources, the windfall profits tax bill, SB 1X, still remains in 
committee in the Assembly.  It is unclear if this bill could be brought to a 
vote tomorrow given that each house has not reviewed the other's version of 
the bill.  Sources further indicate that the Senate version SB 1X, has not 
yet been referred to an Assembly policy committee and that a "significant 
reconciliation process" between the two bills must occur.  For example, 
unlike the Senate version, the Assembly version reportedly does not set a 
price cap based on a firm dollar amount, but instead leaves the decision up 
to a regulatory committee such as the PUC.  Once the bond issuance passes the 
Senate and is officially authorized, the state will likely be able to get its 
bridge loan from the lenders.  However, sources indicate that the bridge loan 
is "dead" unless the Senate moves before Thursday.
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