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Calif. Rescue Plan Stalls, PG&E Defaults February 1, 2001 3:24 pm EST
By Andrew Quinn SAN FRANCISCO (Reuters) - The California state Assembly prepared to vote again on a once-rejected energy rescue package on Thursday as the state's largest utility added new urgency to the crisis by saying it and its parent corporation were defaulting on $726 million in commercial debt.
With power grid managers declaring electricity supplies critically low for the 17th consecutive day, legislators in Sacramento worked feverishly to agree on a rescue plan that would put the state in the business of buying and selling power its bankrupt utilities can no longer afford.
The legislation, which calls for the state to issue as much as $10 billion in bonds to finance the power purchases, fell just three votes short of passage early Thursday after some Republican lawmakers raised fears it could open the door to widespread consumer rate hikes.
Gov. Gray Davis hopes to have a plan in place before scheduled meetings late Thursday and Friday with federal energy officials and fellow western state governors to discuss the energy crisis, which is already reverberating far beyond California's borders.
In a sign of how critical the situation has become, the state's largest utility company, PG&E Corp. 's Pacific Gas & Electric, announced Thursday that it would pay its suppliers only about 15 percent of what they are owed, and that it and its parent company were defaulting on a combined $726 million in short-term commercial paper.
The defaults, which were expected, were disclosed in a filing with the Securities and Exchange Commission.
Pacific Gas & Electric and the state's other major utility, Edison International unit Southern California Edison, say they have been pushed almost $13 billion in debt by skyrocketing wholesale energy prices that they are banned from passing on to consumers under California's 1996 deregulation law. Both have seen their credit rating slashed to "junk" status and say they are close to declaring bankruptcy.
In its filing on Thursday, Pacific Gas & Electric said it would make a partial payment, totaling $161 million, on a pro-rata basis to the qualifying generators, the California Power Exchange (CalPX) and the California Independent System Operator (ISO), which operates the state's power grid.
It said it owes the generators $437 million, and CalPX and the ISO $611 million, up from an earlier estimated $583 million.
It also said it has defaulted on $437 million of commercial paper, and expects to default on $436 million more through the end of March unless its financial situation changes dramatically. PG&E Corp. has defaulted on $289 million, and expects to default on $212 million more by March, it said.
BILL AIMS TO SECURE STABLE POWER SUPPLIES
In Sacramento, the state assembly went back into session at 11 a.m. PST (2 p.m. EST) as lawmakers pushed for another vote on a rescue package which passed through the state Senate but was rejected by the assembly early Thursday.
That vote, 51-28, was just three short of the two-thirds majority needed to pass.
The plan, backed by Gov. Davis, would permit the state Department of Water Resources to enter into long-term energy contracts with suppliers, locking in rates officials hope will be far lower than the astronomical prices currently charged on the spot energy market.
To pay for the power purchases, the bill would authorize the state to issue bonds backed by electricity revenues -- an amount that some estimates see hitting $10 billion. And it would authorize the California Public Utilities Commission to approve rate hikes for consumers who use power in excess of a "baseline" rate deemed sufficient for running an average home.
Republican lawmakers in the assembly balked early Thursday, objecting to the notion of consumer rate hikes and questioning the wisdom of moving forward with a massive bond issue to address the problem.
"Under the bond proposal we're going to be adding in an awful lot of costs that I don't believe we need to, including interest in the costs up front," Republican Assemblyman David Cogdill of Modesto said after the first vote.
State officials say California desperately needs to put some sort of legislation in place to address the crisis, noting that the current strategy of using general funds to purchase power on the spot market was costing taxpayers as much as $45 million per day.
The bill before the assembly would also authorize a further $500 million to finance these short-term purchases. California last Sunday exhausted an initial $400 million emergency fund set up to buy power.
DEMAND REMAINS HIGH
The assembly's struggle over the rescue package came as officials at the ISO declared the state's 17th consecutive day of a top-level power emergency -- saying supplies were so low that rolling blackouts could be ordered at any time.
California last month experienced two days of rolling blackouts as managers scrambled to save the overloaded power grid by cutting power to hundreds of thousands of homes, factories and businesses across the northern part of the state for several hours at a time.
Meteorologists predicted slightly warmer weather Thursday, easing the heating load on the grid but nevertheless holding demand within just 1.5 percent of available reserves and keeping grid operators on high alert.
"The outlook for Thursday is mainly unchanged from yesterday. Supplies are tight...but we're likely not to have blackouts," an ISO spokeswoman said.
-- Martin Thompson (email@example.com), February 01, 2001
Thursday February 1, 2:45 pm Eastern Time
Calif. Utility Pacific G&E Defaults By Jonathan Stempel
NEW YORK (Reuters) - Cash-strapped California utility Pacific Gas & Electric Co. said on Thursday it plans to pay its suppliers only about 15 percent of what it owes them, and that it and its parent, PG&E Corp. (NYSE:PCG - news), have defaulted on $726 million of short- term debt.
California, the nation's most populous state, has suffered from blackouts in the last two weeks. Pacific G&E and No. 2 utility Southern California Edison, a unit of Rosemead, Calif.-based Edison International (NYSE:EIX - news), cannot pass onto consumers their soaring wholesale power costs because of a rate freeze and the state's 1996 deregulation law.
The utilities owe about $12 billion.
Pacific G&E, California's biggest utility, and its San Francisco- based parent, which together have less than $1.2 billion of cash left, made their disclosures in mirror filings with the Securities and Exchange Commission. The defaults on the short-term debt, or commercial paper, were expected.
The filings came after California's Assembly on Thursday rejected emergency legislation to fund state-backed power purchases because some legislators thought it would trigger rate hikes. California's Senate had earlier approved the measure. Another Assembly vote is expected Thursday.
Pacific G&E said its ``intent is to pay its ongoing costs of doing business'' until the power crisis is resolved. PG&E, meanwhile, said it is ``examining'' a restructuring of its bank loans and commercial paper, and that it may take six months for holders of defaulted debt to get back their principal.
PG&E shares traded Thursday afternoon on the New York Stock Exchange at $13.75, down 50 cents, or 3.5 percent. Their 52-week high is $31.81. Edison International shares traded on the Big Board at $13.02, down 32 cents, or 2.4 percent. Their 52-week high is $30.
Pacific G&E serves about 13 million Californians. SoCal Edison serves about 11 million.
Pacific G&E said it plans to will pay on a pro-rata basis just $161 million, or 15.4 percent, of the $1.048 billion it owes to various power generators, the California Power Exchange (CalPX), a clearinghouse for electricity buyers and sellers, and the California Independent System Operator (ISO), which operates most of the state's power grid.
It said it owes the generators $437 million, and CalPX and the ISO $611 million. It had earlier said it expected to owe CalPX and the ISO $583 million. It said it will make partial payments ``based on the electric commodity portion of revenues collected through frozen rates.
Peter Darbee, PG&E's chief financial officer, told investors in a Thursday conference call his company should be able to raise ``substantial amounts'' of cash to pay off holders of defaulted short- term debt three to six months after the state enacts a rescue plan.
Pacific G&E said its cash reserves total $828 million, while PG&E said its reserves total $347 million.
Pacific G&E said it has defaulted on $437 million of commercial paper through Jan. 31, and expects to default on $294 million due February 28 and $142 million due March 31 unless its situation improves.
PG&E, meanwhile, has defaulted on $289 million of commercial paper, and expects to default on $164 million more by February 28 and $48 million by March 31.
Peter Darbee, PG&E's chief financial officer, told investors in a Thursday conference call his company may raise ``substantial amounts'' of cash to pay holders of defaulted commercial paper three to six months after the state adopts a rescue plan
The utility, though, said it plans to keep making regular interest payments on $8.13 billion of other debt, including $938 million of bank debt, $1.24 billion of floating-rate notes, $287 million of medium-term notes, $3.37 billion of mortgage bonds, $1.61 billion of pollution control bonds and $680 million of senior notes.
Pacific G&E also said its banks cut off two credit lines totaling $1.85 billion, following its downgrade by top credit rating agencies to junk status from investment-grade.
PG&E said its banks have terminated two credit lines totaling $936 million.
-- Martin Thompson (firstname.lastname@example.org), February 01, 2001.