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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 To: "Aaron Thomas (E-mail) (E-mail)" <athomas@newenergy.com<, "Andrea Weller (E-mail) (E-mail)" <aweller@sel.com<, "andrew Chau (E-mail) (E-mail)" <anchau@shellus.com<, "Bill Chen (E-mail) (E-mail)" <bchen@newenergy.com<, "Douglas Oglesby (E-mail) (E-mail)" <doao@chevron.com<, "Fairchild, Tracy" <tracy.fairchild@edelman.com<, "Jeffrey Hanson (E-mail) (E-mail)" <jeff.hanson@phaser.com<, "jennifer Chamberlin (E-mail) (E-mail)" <jnnc@chevron.com<, "john Barthrop (E-mail) (E-mail)" <jbarthrop@electric.com<, "John Leslie (E-mail) (E-mail)" <jleslie@luce.com<, "Joseph Alamo (E-mail) (E-mail)" <jalamo@enron.com<, "Manuel, Erica" <Erica.Manuel@edelman.com<, "'Michael Nelson' (E-mail)" <mnelson@electric.com<, "Peter Bray (E-mail) (E-mail)" <pbray@newpower.com<, "Rebecca Schlanert (E-mail) (E-mail)" <rschlanert@electric.com<, "Richard Counihan (E-mail) (E-mail)" <rick.counihan@greenmountain.com<, "'Robert Morgan' (E-mail)" <rmorgan@newenergy.com<, "Sue Mara (E-mail) (E-mail)" <smara@enron.com<, "Allen, Stevan" <stevan.allen@edelman.com<, arm@phaser.com, "brbarkovich@earthlink.net" <bbarkovich@earthlink.net'<, cra@calretailers.com, dennis.flatt@kp.org, dhunter@smithandkempton.com, djsmith@smithandkempton.com, Dominic.DiMare@calchamber.com, drothrock@cmta.net, gharrison@calstate.edu, hgovenar@govadv.com, jackson_gualco@gualcogroup.com, ken_pietrelli@ocli.com, kgough@calpine.com, kmccrea@sablaw.com, kmills@cfbf.com, lhastings@cagrocers.com, mday@gmssr.com, mmoretti@calhealth.org, nplotkin@tfglobby.com, randy_britt@robinsonsmay.com, richard.seguin@kp.org, RochmanM@spurr.org, rrichter@calhealth.org, sgovenar@govadv.com, smccubbi@enron.com, spahnn@hnks.com, theo@ppallc.com, vincent.stewart@ucop.edu, vjw@ceert.org, "Warner, Jami" <jami.warner@edelman.com<, wbooth@booth-law.com, wbrown@lhom.com, wlarson@calstate.edu cc: 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 < < <
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