California's Power Band-Aid Kenneth A. Toudouze, CFA 8:13:00 AM January 19, 2001 GMT The California legislature passed a $400m emergency spending plan to allow the state to purchase power for its beleaguered incumbent utilities. This is a stop-gap plan that will only buy the state time to craft a more complete solution to the continuing crisis. The situation remains too fluid to make recommendations, and the local, state and federal officials still have not effected confidence with investors.

The $400m buys the state approximately 12 days to fashion a resolution. Recognize that this $400m represents incremental requirements over and above what Southern California Edision [EIX: NYSE] and PG&E [PCG: NYSE] produce themselves.

This emergency spending resolution comes into play after California suffered its second day of rolling blackouts. Now that their constituencies are fully aware (and impacted) of the power deregulation failure, you can bet the state legislators will hammer out a solution.

One further point: there's bound to be an earnings impact on California companies that are employing generators to keep the lights on. One company that stands to lose margin is web hosting company Exodus [EXDS: Nasdaq], which is required to provide 24/7 uptime for the websites hosted in its two Silicon Valley centers. Because of the blackouts, the cost of supplying required energy to keep these contractual obligations will impact earnings for the current quarter.

http://www.ideaadvisor.com/article/article_print.asp?aid=8193

-- Martin Thompson (mthom1927@aol.com), January 19, 2001

Answers

This is surely a band aid! This isn't going to help in the long run scheme of things!

-- lurker.. (none@no.com), January 19, 2001.