Wall Street Boo Calif. Power Plan

Reuters Jan. 09, 2001 16:20

LOS ANGELES - Wall Street gave a thumbs down on Tuesday to Gov. Gray Davis' proposals to solve California's electric power crisis while the governor flew to Washington to press his plan with utility executives, federal regulators and the Clinton administration's top economic officials.

Davis, in his State of the State address on Monday, vowed to save the state's two biggest public utilities from bankruptcy as he proposed creation of a new power authority for the state and a crackdown on price-gougers.

But the plan did not contain enough details for Wall Street, especially on how he will save investor-owned utilities that have run up about $12 billion in extra power purchase costs that state law forbids them from passing on to customers. The burden has taken them to the brink of bankruptcy and created a crisis that some say threatens the economy and the stability of banks that loan money to the utilities.

The Standard & Poor's utility index was down almost 5 points or about 1.5 percent at 302.15 in midday trade, with Southern California Edison and Pacific Gas and Electric -- the state's two biggest private utilities -- among the biggest losers. The broader Dow Jones Industrial Index was down less than 1 percent at 10,570.11.

Edison International (NYSE:EIX), SoCal Edison's parent, closed down over 7 percent or 7/8 at $11-1/8 while PG&E Corp. (NYSE:PCG), the parent of Pacific Gas & Electric, ended about 4 percent or 1/2 lower at $13-1/2.

In the past year, Edison has traded as high as $30 while PG&E posted a 52-week high of $31-13/16.

``Gov. Davis's speech provided a commitment to keep the state's investor-owned utilities solvent, but lacked concrete proposals to provide cash needed to achieve this outcome,'' analyst Dan Ford of ABN Amro said, echoing a sentiment heard widely on Wall Street.

``I found it disappointing. I was expecting something. We will now look to Sacramento and Washington in the next two or three weeks (for action) and that is probably all the window we have,'' said Steve Fetter, managing director of the Global Power Group at credit rating agency Fitch.

Fetter said possible sources for financial support for the cash-strapped utilities were either California's electricity buyers or taxpayers or federal taxpayers.

``There is no talk of any of those groups supporting the utilities' position so it is a very dire situation and we continue to monitor it hour by hour,'' Fetter said.

Fitch last week downgraded the utilities' debt to junk status. Fetter said in the light of Davis' remarks he is comfortable with that move.

Davis was to meet late Tuesday afternoon with senior Clinton administration officials, utility company executives and federal regulators to search for ways to limit the economic fall-out of the energy crisis..

Treasury Secretary Lawrence Summers, Energy Secretary Bill Richardson and Gene Sperling, director of the National Economic Council, were to lead the session scheduled to begin at 5 p.m. EST.

Executives from SoCal Edison and Pacific Gas & Electric -- along with Federal Energy Regulatory Commission (FERC) Chairman James Hoecker were also expected to attend.

Hoecker and his independent agency have been widely criticized for failing to approve a cap on wholesale electricity prices throughout the western region to give utilities some relief from soaring spot market prices.

The issue of a regional price cap -- already endorsed by Richardson -- is expected to be on the agenda.

An Energy Department spokesman said the Tuesday meeting would continue until ``something gets done.''

Richardson, speaking during a visit to Wyoming on Monday, urged all sides to ``give a little'' when they met on Tuesday. ''Everybody needs to give a little -- the California utilities, the state government,'' Richardson told reporters.

http://www.arizonarepublic.com/news/reuters/stories/BUSINESS-UTILITIES-CALIFORNIA-DC.html

-- Martin Thompson (mthom1927@aol.com), January 09, 2001