State has only signed up 500 MW according to this article

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 02/14/2001 09:57 AM -----

	"Ronald Carroll" <rcarroll@bracepatt.com>
	02/14/2001 08:11 AM
		 
		 To: <rreilley@coral-energy.com>, <acomnes@enron.com>, <jsteffe@enron.com>, 
<mary.hain@enron.com>, <smara@enron.com>
		 cc: 
		 Subject: Fwd: California Governor Requests Additional $500 Million to Buy 
Energy


----- Message from "Tracey Bradley" <tbradley@bracepatt.com> on Wed, 14 Feb 
2001 08:00:19 -0600 -----
To:	"Paul Fox" <pfox@bracepatt.com>
cc:	"Andrea Settanni" <asettanni@bracepatt.com>, "Ronald Carroll" 
<rcarroll@bracepatt.com>
Subject:	California Governor Requests Additional $500 Million to Buy Energy
California Governor Requests Additional $500 Million to Buy Energy 
Dion Nissenbaum , San Jose Mercury News, Calif. 

( February 14, 2001 ) 



Feb. 14--SACRAMENTO, Calif.--As Gov. Gray Davis works to craft a bailout plan 
for California's two largest electric utilities, California's fledgling foray 
into the power business is coming at an ever more expensive price that is 
nearing $2 billion. 

For the second time in about a week, the Davis administration alerted 
lawmakers Tuesday that it needs another $500 million to buy energy on the 
costly short-term market while negotiators try to work out long-term 
contracts with power suppliers. 

That brings the two-month state price tag to about $2 billion, far exceeding 
early estimates that California would have to spend about $1 billion to 
launch its energy buying program. The news has left some lawmakers worried 
that the state is burning through money without making enough progress in 
resolving the underlying problems. 

With the bills piling up, Davis is looking to present Southern California 
Edison and Pacific Gas and Electric with a plan by week's end to rescue the 
two companies edging ever closer to bankruptcy. The state was forced to start 
buying power because the two utilities have exhausted their credit. 

For now, the governor's advisers appear to have decided on state ownership of 
the utility transmission lines as the foundation of any deal, according to 
sources involved in the negotiations. 

In a Tuesday press conference, Davis said he has not settled on transmission 
lines, but wants to make sure that the state gets something in return for 
rescuing the companies. 

"What I will propose, hopefully this Friday, will not be a bailout, it will 
be a buyout," Davis said. 

Buying the transmission lines has become the most-favored option in the 
Capitol in recent days as what one consumer activist called the "crown jewel" 
of any solution. A state Senate committee formally embraced the idea Tuesday 
by approving a bare-bones bill that encourages Davis to buy the transmission 
lines as part of any utility deal. 

Several issues must be settled before a transmission line deal is final. It 
still isn't clear what the lines are worth, or whether the utilities will 
have to pay capital gains taxes on the lines if they sell them to the state. 
And under the law, the federal government may have veto power over any 
transmission line deal. But negotiators expressed confidence they can resolve 
those issues. 

However, the state is still struggling to put together low-cost, long-term 
contracts with power companies that are essential to keeping electric bills 
close to current levels. 

When legislators gave Davis the power last month to sign the energy deals, 
they set aside $500 million to tide the state over until it could get the 
contracts in place. That came on top of another $1 billion from other funds 
that have been used to buy energy that now costs about $45 million a day. 

California won't be able to stop spending so much until it signs enough 
long-term contracts. But negotiations have been plodding along and so far the 
state has managed to come up with only about 500 megawatts -- enough to power 
a half million homes. 

"I am starting to get concerned about the pace at which they appear to be 
entering into contracts," said Assemblyman Fred Keeley, D-Santa Cruz. "It is 
slow and there don't appear to be many of them." 

Davis has released few details about the contracts, but has expressed 
optimism that his negotiators will be able to put together enough deals to 
solve the problems. 

"No one ever expected this to be a slam dunk because it's a tough 
negotiation," said Davis spokesman Steve Maviglio. "But we're making 
progress." 

Ultimately, the state is supposed to be reimbursed for its mounting 
expenditures in the spot market, under terms of a $10 billion power-buying 
bond bill approved by the legislature two weeks ago. The treasurer's office 
intends to sell the first of those bonds in May, and their proceeds will be 
transferred to the state general fund. 

Later bond issues will generate money to be used for the long-term contracts. 

Bond investors will be repaid by utility ratepayers, but it is not yet clear 
whether that will involve a rate increase. 


Staff writers Cheryl Devall, Mark Gladstone, Chris O'Brien and Hallye Jordan 
contributed to this report. 

      

----- 

To see more of the San Jose Mercury News, or to subscribe to the newspaper, 
go to http://www.sjmercury.com 

(c) 2001, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune 
Business News.
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