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Date: Wed, 21 Mar 2001 08:20:00 -0800 (PST)
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Subject: FW: Associated Press story: Power spending imperils state's finan
	cial health, controller says
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Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 03/21/2001 04:19 PM -----

	"Beiser, Megan" <Megan.Beiser@edelman.com>
	03/21/2001 03:42 PM
		 
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		 Subject: FW: Associated Press story: Power spending imperils state's finan 
cial health, controller says



> Power spending imperils state's financial health, controller says
> 
> Updated: March 21, 2001 - 3:11 p.m. 
> 
> California's power-buying on behalf of two strapped utilities is gutting
> its budget surplus and putting the state at financial risk, the state
> controller said Wednesday.
> 
> The surplus dropped from $8.5 billion in January, when the state began
> buying electricity for Pacific Gas and Electric Co. and Southern
> California Edison, to $3.2 billion now, Kathleen Connell estimates.
> 
> Connell ordered an audit of the state's power-buying, saying
> Gov. Gray Davis is withholding key financial information from her office
> and the Legislature.
> 
> Wednesday marked the first time in three days the state avoided rolling
> blackouts. Power grid officials credited cooling temperatures and the
> completion of repairs at several power plants.
> 
> Connell said the energy crunch now imperils the state's budget as well as
> its electric grid.
> 
> California has been spending about $45 million a day --$4.2
> billion so far -- to buy power for Edison and PG&E, both denied credit by
> electricity wholesalers.
> 
> The two utilities, California's largest, say they are nearly $14 billion
> in debt due to soaring wholesale power costs the state's deregulation law
> blocks them from recovering from customers.
> 
> Meanwhile, the state has faced high natural gas costs and a
> tight power supply driven in part by power plant repairs in
> California and scarce hydroelectric power in the Pacific Northwest.
> 
> Standard & Poor's has put the state on a credit watch due to its power
> purchases and chastised Davis, the Legislature and state regulators for
> not taking more aggressive steps to assure the utilities can pay their
> bills.
> 
> On Wednesday, Connell said she is refusing a request by Davis and the
> Legislature to transfer $5.6 billion into a "rainy day fund" she said was
> set up to impress Wall Street as the state prepares to issue $10 billion
> in revenue bonds to cover its power-buying.
> 
> Transferring the money would leave the state general fund $2.4 billion in
> debt, Connell said.
> 
> Sandy Harrison, spokesman for the state Department of Finance, and Keely
> Bosler of the Legislative Analyst's Office, said such transfers are
> routine and required by law.
> 
> They put the state's budget surplus at $5.6 billion.
> 
> "The law says she has to do it. The law does not give her the power to
> demand that kind of audit information," Harrison said.
> 
> He said the state's budget isn't in danger because it will be
> repaid with the $10 billion in long-term debt.
> 
> Connell said the scope of the proposed transfer is unprecedented and
> amounts to a "shell game" that disguises the power purchases' impact on
> the state budget.
> 
> Wells Fargo & Co. chief economist Sung Won Sohn said he sees little
> progress in efforts to fix the state's power problems and end state
> electricity purchases.
> 
> "If we're going to pour money into a bottomless pit, I would
> worry about the state's finances," he said. "At some point we're going to
> run out of money."
> 
> The controller's criticism of fellow Democrat Davis won support from
> Assembly Republicans and Secretary of State Bill Jones, a Republican
> considering challenging Davis next year.
> 
> Jones said he wants to announce his own plan to solve the
> state's energy woes, but can't unless Davis releases more financial
> details. He said his plan may involve giving the utilities low-interest
> loans with their transmission lines held as collateral.
> 
> Davis spokesman Steve Maviglio dismissed the criticism.
> 
> "Political grandstanding doesn't generate one more kilowatt of energy for
> California in this time of emergency," he said.
> 
> Maviglio said the administration has released the financial
> information it can without jeopardizing negotiations for long-term power
> contracts with wholesalers.
> 
> -- Associated Press
> 
> 
> 
