Subject: california update 9 - 14 - 2001
for questions or comments regarding this report please contact g . britt whitman at ex : 5 - 4014 or kristin walsh at ex : 3 - 9510 .
executive summary
? senate may seal socal ' s fate
? socal edison eyeing bankruptcy
california senate an additional two dissenting democrat votes would effectively block ab 67 xx . consumer advocates that adamantly oppose this bill ( because it lacks the state ' s ownership of hard transmission assets and burdens residential consumers with excessive rates ) are " optimistic " about the bill ' s defeat in the senate . despite these circumstances , it is highly conceivable that the senate could pass along a virtually ineffective & inadequate bailout package for the assembly ' s approval .
burton is reportedly avoiding discourse with davis over ab 67 xx and as the hours pass ever closer to the midnight deadline , burton will likely introduce the bill for floor vote and then hurriedly adjourn the senate . if the bill passes , the assembly will bare the difficult task of either accepting the bill as is , or reject the bill and risk socal ' s bankruptcy . we believe that if the bill makes it into the assembly , ab 67 xx will pass despite strong opposition from both the ctma and consumer advocates . there is no current vote count available in the assembly , but we expect the assembly to debate the bill into the early hours of saturday morning .
inside edison
there are still strong indications that even if a bailout plan is passed , socal will voluntarily file for bankruptcy or a creditor , most likely a generator , will take them into bankruptcy . socal remains concerned due to the number of contingent claims on their cash ( by the dwr , etc . ) and appear likely to try to protect these cash flows . from the generators ' perspective , if a plan is passed , the bank creditors will get paid but they will not . also , the dwr and iso have not resolved even what amount is owed to generators for power they have provided this year , let alone when they will be paid . the total amount owed through the iso is approximately $ 2 b . nonetheless , the generators remain under a federal order to provide power to the state . once a deal is passed leaving too little money for socal to pay the generators , this will leave them with little means of satisfaction other than filing against socal .
socal has privately indicated to senators that if the ab 67 xx fails to include any consumer using 100 kv or more as the base for the dedicated rate component , socal will be forced to file for bankruptcy because of their inability to effectively securitize the bailout bonds . socal feels that this rate base is too small and the risk of these businesses fleeing the state is too high . the ctma also has indicated that some of its members may leave the state to avoid having to pay the extra surcharge on power .
socal has not communicated a position on whether the $ 400 million trim ( from the original $ 2 . 9 b ) puts them into bankruptcy . we estimate that an additional $ 400 million hit is indeed too much to bear and would prompt a voluntary bankruptcy petition .