Generators expect California utility to pay bill Tuesday

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Generators expect California utility to pay bill Tuesday

The Associated Press 1/15/01 4:15 PM

LOS ANGELES (Dow Jones News) -- Power suppliers owed several hundred million dollars in January power bills by Southern California Edison expect payment when the bills come due Tuesday, some generation company executives said Monday.

But they may be in for a bad surprise.

On Sunday, a senior executive with Southern California Edison said the utility doesn't have the cash on hand to pay its Tuesday bill due to the California Power Exchange for electricity purchases made in the state's spot market for electricity.

That's news to several generation executives, who said they haven't discussed deferring the millions in January power bills owed by the Edison International unit.

Executives with Dynegy Inc., Reliant Energy Inc., Duke Energy and Southern Energy said White House-brokered talks among their companies, California's two largest utilities and state officials have addressed deferring payments for the utilities' February, March and April bills.

But January payments aren't involved in the talks and are expected to be made on time, the executives told Dow Jones Newswires.

"We never discussed delaying the January payments," said one executive with Dynegy. "This is news to us. We won't agree to it."

The CalPX -- which operates the state's day-ahead, day-of and block-forward wholesale power markets -- bills the utilities for power purchases and distributes the proceeds to suppliers that sold electricity into the exchange.

http://www.nj.com/newsflash/index.ssf?/cgi-free/getstory_ssf.cgi?f0074_BC_DJN--Edison-Bills&&news&newsflash-financial

-- Martin Thompson (mthom1927@aol.com), January 15, 2001

Answers

50% of something is better 100% nothing, bonehead.

-- David Williams (DAVIDWILL@prodigy.net), January 16, 2001.

Buck up or buck off! I get tired of hearing about California's childish tantrum. Every one else pays their oun way.

-- Lee Blocher (cblocher@northernway.net), January 16, 2001.

Maybe you are right Lee

I get tired of posting all this California Stuff also. Any suggestions?

-- Martin Thompson (mthom1927@aol.com), January 16, 2001.


Power Firm Demands Utilities Pay Bills Now

Electricity: Supplier says it will haul Edison and PG&E into bankruptcy court if money isn't forthcoming. Lawmakers scramble for a solution.

By NANCY VOGEL and MIGUEL BUSTILLO, Times Staff Writers

SACRAMENTO--Increasing the pressure on state lawmakers to craft at least a temporary solution to California's power crisis, a major power supplier threatened Monday to force Southern California Edison and Pacific Gas & Electric into bankruptcy court unless the utilities pay their bills due this week.

The move by Dynegy Inc. of Houston upped the ante on a day when legislators huddled with financial experts and lawyers but reached no agreement on a mechanism for the state to buy electricity for Edison and PG&E at rates far lower than they pay now--allowing the beleaguered utilities breathing room to restructure their massive debts.

"If we can't get this bill through in the next two days, this will start to unravel," said Stephen W. Bergstrom, president of Dynegy. "When and if they [Edison] default on Thursday, it puts us in a position where we have to take them into bankruptcy, and I'm sure others will be right beside us."

Bergstrom refused to say how much money Dynegy is owed, but said if any three creditors jointly petitioned the court, it would be enough to start involuntary bankruptcy proceedings. Under a plan outlined this weekend by Gov. Gray Davis after marathon bicoastal negotiations, the state would use its excellent credit rating to purchase electricity and then resell it to debt- hobbled utilities. The state Department of Water Resources has stepped in on an emergency basis to buy power to prevent blackouts, but Davis' plan would, overnight, make California the biggest single buyer of electricity in its own market.

Legislators generally backed the need for the state to buy power, but there has been no agreement on two key issues: the price and the duration of the contracts. The price needs to be low enough so that utilities, with the rates currently in place, can save enough to restructure their debts--but high enough so that the power producers will go along with the plan.

With attention focused on how Wall Street will view the tenuous agreement when markets reopen after the weekend, legislators were fighting multiple deadlines in trying to make good on the weekend promise to pass a bill by today. Edison owes a major payment today to the Power Exchange, the market created in 1998 under deregulation. Power industry sources say they believe Edison has the cash to make the payment, estimated at more than $150 million, but that the firm could play high-stakes political poker by delaying payment to increase pressure on lawmakers. Technically, Edison will not be in default on the payment until Thursday. Edison officials refused to comment on the negotiations with state leaders or the firm's obligations to the Power Exchange. They said they would disclose details today in a filing with the federal Securities and Exchange Commission. PG&E officials said Monday that they would pay their $40-million bill due this week. The utility has approximately $500 million in cash, a spokesman said, with a bill for about $580 million due Feb. 1. Electricity sellers have been increasingly reluctant to supply California because of the deteriorating financial condition of the utilities.

The volume of electricity traded in the Power Exchange has dropped by roughly 75% in the last month. Grid operators have struggled daily to buy enough power to balance flow on high-voltage wires and prevent blackouts. On Monday, a holiday during which many offices and businesses were closed, the state's power reserves shrank to nearly 5%. Legislators, convened in an emergency session on the state's energy crisis, quickly seized on Davis' idea. "We're working here around the clock, doing everything we can," said Assembly Speaker Bob Hertzberg (D-Sherman Oaks) during an afternoon break in talks among a half-dozen Republican and Democratic lawmakers. Also involved were the state's finance director, a bankruptcy lawyer, and two utility experts from Credit Suisse First Boston. Their purpose was to craft a skeleton of the legislation that California will need to implement Davis' proposal and have it passed by at least one house of the Legislature today. Senate leader John Burton (D-San Francisco) has said that while the Legislature works, power generators should be willing to give utilities leeway on bills coming due. But that's unlikely unless the Legislature acts quickly, said Bergstrom of Dynegy. His company purchased three Southern California power plants when Edison, PG&E and San Diego Gas & Electric auctioned off assets as part of deregulation. Dynegy's plants can generate enough electricity to supply 2.8 million homes. "We're just not going to do that," Bergstrom said, "because the stakes are too high." He met with Davis and California lawmakers in Washington, D.C., last Tuesday evening and spoke to them again through a bicoastal video conference Saturday. The governor has been lobbying power plant owners to sign long-term contracts with the utilities at roughly 5.5 cents per kilowatt-hour--well below the recent market rate of 30 cents. Power plant owners call that price unrealistic unless the contract lasts at least six or seven years, allowing them to recoup money later, when the cost of natural gas is expected to fall and make electricity cheaper to generate. Contract details do not matter, Bergstrom said, so long as the utilities are so debt-ridden as to be unworthy of credit. That's why the state needs to step in to buy power and guarantee payment, he said. But some lawmakers have downplayed the urgency. Burton has said it is more important to get the details of a bill right than to move quickly. To insert the state as a go-between in California's electricity market raises many complex financial and political issues. Even lawmakers who support helping the utilities insist that consumers get something in return. Stock options, ownership of utility transmission lines or takeover of hydroelectric power plants--a cheap source of power that affects the environmental health of many Sierra Nevada rivers--are among the assets the state should consider, Burton said. Hertzberg spokesman Paul Hefner said lawmakers have included bankruptcy lawyers and financial experts not solely to impress Wall Street, but also because they realize they are entering a realm they know little about.

He said politicians clearly want to "send a message to financial markets" that they are working with industry experts when considering the consequences of their legislation. But he said their main goal is to get technical advice from someone who is not a bureaucrat and is not employed by a power firm.

http://www.latimes.com/business/reports/power/lat_power010116.htm



-- Martin Thompson (mthom1927@aol.com), January 16, 2001.


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