California enters Dante’s Inferno

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California enters Dante’s Inferno

12/28/2000 The hounds of hell seem to be having quite a romp in California as regulators opened two days of public hearings into ways to correct California’s troublesome power sector.

Amid the crisis, Gov. Gray Davis appealed to the White House for relief, while Southern California Edison, with bankruptcy nipping at its heels, sued the U.S. Federal Energy Regulatory Commission (FERC) to lower soaring power prices. PG&E, the state’s largest utility, demanded, begged and pleaded for an immediate 26% rate increase.

And consumer groups clamored to return to the good ol’ days of regulated markets, which appears to be the only thing all the parties to this disaster agree makes the most sense.

Southern California Edison and PG&E claim they face a US$11 billion to US$13 billion power buy-sell deficit by the end of December and January, respectively. Edison filed a brief with the U.S. Securities & Exchange Commission (SEC) Tuesday, Dec. 26, stating its inability to syndicate a US$1 billion revolving credit line. It also said the company must repurchase more than US$419 million in pollution control bonds because of the uncertainty over its credit rating.

As financial conditions worsen, rating agencies like Standard & Poor’s Rating Services and Fitch expect to make a decision next month on whether to downgrade the utilities’ paper to junk status. The agencies expect to hold off until after Jan. 4, when the California Public Utilities Commission (PUC) considers the rate increase.

Gov. Davis and Cal-ISO continue to push the federal government to extend an emergency order that forces power producers to keep selling wholesale electricity to California utilities despite their financial straits.

According to the Wall Street Journal, Davis met with President Clinton Wednesday, Dec. 27 and with Federal Reserve Chairman Alan Greenspan and Treasury Secretary Lawrence Summers Tuesday. He told the Journal he remains optimistic that the federal government will extend the order now in effect until Jan. 5.

Unable to share such optimism, however, Southern California Edison sued FERC in a Washington, D.C. district court yesterday, claiming that the federal agency abdicated its duties when it declared earlier this month that wholesale power prices in California were “unjust and unreasonable,” but failed to act.

Instead of requiring generators to refund the utilities for these “unjust and unreasonable” power prices, FERC set a relatively high wholesale price cap and told generators they would have to offer justification for exceeding it.

Edited by April C. Murelio, Managing Editor, Power Online

http://www.poweronline.com/content/news/article.asp?DocID={9D967B3D-DCCB-11D4-A76E-00D0B7694F32}&Bucket=Top+Headline

-- Martin Thompson (mthom1927@aol.com), December 29, 2000


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