Steve Kean Quoted

Enron: ISO Credit Problems Are Those Of Calif Utilities
Of DOW JONES NEWSWIRES

12/13/2000
Dow Jones Energy Service
(Copyright © 2000, Dow Jones & Company, Inc.)

By Mark Golden
NEW YORK -(Dow Jones)- The credit problems of the California Independent
System Operator reflect the credit problems of the state's three
investor-owned utilities, Enron Corp. (ENE) chief of staff Steven Kean said
Wednesday.
"We have expressed some concerns about the utilities' creditworthiness," Kean
said. "They wouldn't have this credit issue if they had a government
guarantee."
Standard & Poor's credit analyst for California utilities, Richard Cortright,
told Dow Jones Newswires that such a guarantee is highly unlikely.
"There's no point in talking about it," Cortright said.
The credit-rating agency put California utility holding companies PG&E Corp
(PCG) and Edison International (EIX) on watch with negative implications
Wednesday. The utilities have seen their debt rating downgraded already this
fall, but their debts are piling up by the billions as they continue to pay
about 10 times more for power supplies than they can charge customers.
"The sheer magnitute of the undercollected balance is beyond belief,"
Cortright said. "Wholesale prices have gotten worse, and every hour the
situation gets more dire."
Cortright said the only step that would save the utilities' credit status is
if California regulators raised the rates the utilities can charge customers.
Late Wednesday, the California Public Utilties Commission indicated that it
may do so, reversing a decision made just last week.
"With new generation coming on, you would expect the rates to decline in a
couple of years," Cortright said.
The California Independent System Operator almost had to institute rolling
blackouts Wednesday because 13 suppliers had stopped selling it power due to
concerns about the ISO's credit.
California Gov. Gray Davis said that Enron was one of the "dirty 13."
Enron's Kean said that Enron was only offering very limited amounts of power
to the ISO.
"We are basically just a buyer and seller. We control only 70 megawatts of
generation in the state, which we offered to the ISO today because of the
emergency, but the ISO declined to purchase that power," Kean said.
That small generating unit is located in the southern California, while the
ISO's supply problems were most acute in northern California.
"We aren't selling any other power to them right now. Everything else that we
bought we've sold to other buyers," said Kean, who added that Enron had sold
to the ISO as recently as Tuesday.
The ISO manages California's electricity grid and purchases last-minute
additional power on behalf of the state's three investor-owned utilities. The
ISO then bills the utilities, which are PG&E Corp's Pacific Gas & Electric
Co, Edison International's (EIX) Southern California Edison, and Sempra
Energy's (SRE) San Diego Gas & Electric Co.
The ISO has 70-day payment terms to suppliers.
For the past two weeks, and often during the summer, the ISO has been
purchasing about one-fourth of the state's entire needs at very high prices.
It's current daily power purchases are running at $50 million to $100
million.