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Davis seizes SoCal Edison contracts
By Lisa Sanders, CBS.MarketWatch.com 9:04 PM ET Feb 2, 2001 SACRAMENTO (CBS.MW) -- Calif. Gov. Gray Davis seized control of power contracts worth hundreds of millions of dollars late Friday before they could be sold to pay off Southern California Edison debts. Davis took the emergency action after the struggling utility lost a court fight to retain control of the so-called "block forward contracts." The contracts give the holder the right to buy electricity at a set price and had been pledged as collateral against $215 million the utility owed out-of-state power generators.
The state has been buying high-priced electricity on the spot wholesale market since mid-January to prevent blackouts in the state because SoCal Edison and Pacific Gas & Electric are near bankruptcy and can't get credit to buy more electricity.
"I am using my emergency powers to seize options to buy very inexpensive power that would otherwise be lost forever," Davis said in a statement. "These options will provide reliable power through the end of the year. It is important to protect these contracts for the people of California."
Davis' move is another dose of bad news for out-of-state power generators, which already are worried that they'll never see the billions of dollars owed to them by Edison and PG&E, the state's biggest utilities.
A state court judge in Los Angeles had ruled earlier Friday that the California Power Exchange could liquidate the contracts immediately.
The contracts were pledged against debts owed to electricity generators that sold power through the state's defunct power exchange.
Edison International's (EIX: news, msgs) Southern California unit defaulted on those debts last month, but it won a temporary delay when the state attorney general's office intervened in the case a week ago.
On Monday, a San Francisco Superior Court judge is expected to act in accordance with his Los Angeles counterpart and allow forward contracts belonging to PG&E to be sold to pay off creditors, said Jesus Arredondo, a spokesman for the power exchange.
An injunction prohibiting the CalPX from liquidating those contracts expires Monday.
Also Friday, PG&E (PCG: news, msgs) and SoCalEd defaulted on $700 million worth of payments due the California Independent System Operator. PG&E owes $611 million and SoCalEd owes $90 million for real-time energy usage from mid-November to mid-December. The ISO is supposed to pay power providers Monday
-- Martin Thompson (firstname.lastname@example.org), February 02, 2001