Summary of Weekend events:

This pretty much summarizes the events over the weekend resulting from PG&E's
filing on Monday--more stellar leadership from the administration.
Biggest news is that the Governor is now frantically trying to cobble
together a Tx buy-out deal with Edison & Sempra; but note that Burton in this
story questions whether it makes sense to buy Tx if PG&E isn't part of the
deal.
The first hearing on the bankruptcy is today.

Governor, Utility In War Of Words
Davis furious as PG&E defends bankruptcy filing
David Lazarus, Chronicle Staff Writer
Monday, April 9, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/09/M
N223519.DTL
California's energy mess took an ugly turn yesterday as Gov. Gray Davis and
Pacific Gas and Electric Co. traded barbs over who is to blame for the
bankruptcy of the state's largest utility.
In a series of tit-for-tat statements, each side laid claim to the moral high
ground while insisting that the other had been dealing in bad faith.
The governor spent part of his time yesterday giving television interviews in
response to The Chronicle's report Saturday that PG&E awarded $50 million in
bonuses and raises to 6,000 employees just hours before Friday's bankruptcy
filing.
"PG&E's management is suffering from two afflictions: denial and greed,"
Davis said in a brief statement Saturday night.
In a testy reply, PG&E countered that "instead of focusing all his attention
on solving the state's yearlong and ever-worsening energy crisis, the
governor has launched a campaign-style attack on our company."
PG&E said Davis was criticizing "thousands of men and women who have worked
tirelessly and professionally through this crisis" and concluded that
"California would be far better served if the governor turned his attention
to the crisis at hand."
Steve Maviglio, a spokesman for the governor, fired back yesterday: "PG&E
waged a public relations war on Friday. If they're looking for somebody to
blame, they should look in the mirror."
Maviglio also said the governor was concentrating on reaching a final accord
with Southern California Edison Co. for the state to purchase the cash-
strapped company's power lines for nearly $2.8 billion.
A last round of talks was scheduled to be held last night.
"There are a few remaining details to be worked out, but it seems pretty
close," Maviglio said, adding that an announcement of the deal could come as
early as today.
"The governor is spending his time negotiating with a responsible utility,"
he said.
Along with the Edison deal, Davis spent the weekend huddling with energy
advisers and lawyers trying to come up with an appropriate response to PG&E's
bankruptcy bombshell.
Efforts to stabilize California's dysfunctional electricity market suddenly
have become much more complex.
NOT MUCH CHANGED
Nevertheless, while PG&E's bankruptcy is by far the most sensational aspect
of California's long-drawn-out energy mess, at the end of the day, it doesn't
really change a thing.
Consider:
-- PG&E's financial woes stem from a rate freeze that prevented the utility
from passing along to customers runaway wholesale power costs. That rate
freeze and sky-high electricity prices remain in place.
-- California's energy shortage is primarily the result of the state not
having built any major power plants for the past 12 years. PG&E's bankruptcy
does nothing to affect that precarious situation.
-- PG&E's foray into bankruptcy court does not alter the fact that
electricity demand is outpacing available supply. California consumers still
face a threat of daily blackouts when power usage spikes this summer.
"The crux of the problem is still the same," said Loretta Lynch, president of
the state Public Utilities Commission. "We face the same challenges we did
before PG&E filed for bankruptcy."
She added, however, that PG&E's bankruptcy "increases the uncertainty."
The utility doesn't see it that way.
PG&E spokesman Ron Low said California's energy woes are no more uncertain
now than they were when the company ostensibly was negotiating with Davis to
find an equitable solution to the state's troubles.
"California remains in an energy crisis," he said. "As we head toward summer,
resources are going to be very tight."
WHAT COULD HAPPEN
In the short run, consumers will notice no change whatsoever. Bankruptcy
protection will allow PG&E to continue operating as usual while the company's
creditors line up to receive at least partial payment of outstanding bills.
Longer term, there is a very real possibility that electricity rates will
soar if the bankruptcy judge agrees with PG&E that conditions for lifting the
rate freeze were met a year ago and that $9 billion in subsequent expenses
must be borne by consumers.
How much people's bills would rise depends on how the rate increase is
structured. It would probably come in the form of a surcharge on existing
fees,
but the monthly hit to consumers could be limited by spreading the total cost
over a number of years.
The big question mark now is how PG&E's bankruptcy will affect various
political and legislative measures intended to keep California's lights on.
The state's attempt to purchase PG&E's power lines is obviously finished,
although a new deal could be negotiated in bankruptcy court.
Meanwhile, the governor is pressing ahead with plans to purchase the
transmission systems of Edison and Sempra Energy's San Diego utility --
although what the state would do with only a partial power grid has yet to be
determined.
"Does it make any sense to have the transmission lines of Edison and Sempra
and not PG&E?" asked state Senate President Pro Tem John Burton, D-San
Francisco. "I don't know the answer to that."
A final accord with Edison this week would validate PG&E's apparent concerns
that it would have had a harder time limiting backlash to its bankruptcy
filing if the utility had acted after a breakthrough with Edison was
unveiled.
The Chronicle quoted PG&E insiders yesterday as saying that the decision to
file for bankruptcy had been made early last week, even though senior company
officials said the move followed the governor's Thursday night speech on
solving California's energy issues.
One reason PG&E opted to file on Friday morning was because a final deal with
Edison was expected at any time, observers said.
Paul Patterson, an analyst at Credit Suisse First Boston, noted that if PG&E
had filed for bankruptcy after Edison came to terms with the state, "they
would be seen as a spoiler."
ENSUING CONFUSION
In any case, PG&E's surprise filing has left all concerned scrambling for
footing in the changed political landscape.
Consumer advocates watched with dismay yesterday as the state's political and
corporate powers slugged it out for supremacy.
Nettie Hoge, executive director of The Utility Reform Network in San
Francisco, said all this finger-pointing will do nothing to ensure that
Californians have ample supplies of electricity this summer.
"These guys should grow up and come up with a situation that works for the
public," she said.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1