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Enron Mail |
Executive Summary
California Treasurer Angelides Sets Dates for Bridge Loans & Bonds California's Supreme Court May See Challenge to "Plan B" Angelides on Bridge Loans and Bonds CA Treasurer Angelides has said that beginning 15 August, the state will se= t up a bridge loan. The revenue bonds will not be issued until September o= r October. Angelides is not concerned about a cash crisis in July or Augus= t. However, he is quite worried about problems with cash flow in October a= nd November. This is based on calculations he has done with numbers from t= he DWR and from other parts of the government, not on payment terms for pow= er. He fears there will be a cash management problem. California Supreme Court to Challenge "Plan B" California Attorney Michael Sturmwasser is expected to challenge "Plan B" b= efore the California Supreme Court on the basis that it results in a retroa= ctive rate increase and that it removes the PUC's authority to review power= purchases. This is because "Plan B" enables SoCal to collect a dedicated = rate component to pay both its undercollect and its expenses going forward.= SoCal (and PG&E) would have to be guaranteed this dedicated rate componen= t to be able to operate going forward and remain credit-worthy. This takes= the burden of financing the energy crisis away from the state and off the = state's balance sheet, a key goal of lawmakers. However, at the same time,= it also abrogates the PUC from its responsibility to review power purchase= s. The state cannot give the utilities a blank check (in the form of a ded= icated rate component) to operate without taking authority away from the PU= C. According to the California constitution, the legislature can add to th= e responsibilities of the PUC, but it cannot take away powers from the PUC.= At the same time, ratepayers will be paying an additional surcharge for p= ower that they have already used. Sources describe Sturmwasser's case as "= arguable"; in other words, it has a fair chance of succeeding. However, re= gardless of whether the challenge succeeds or fails, it is very likely to c= loud the issue of the bail-out and significantly deflate the prospects of t= he Plan B. If FERC were to impose cost-based controls on power prices, sources believe= it might "go a long way toward avoiding these problems." Were this to hap= pen, the PUC could declare FERC's rates "just and reasonable," which would = likely greatly lessen the crisis and keep SoCal liquid. However, such meas= ures by FERC require significant lead time. Sources state that "the state = needs to tease the feds into doing this." This can be done by conducting s= tudies to obtain current cost data and update the data FERC would use for d= etermining the cost controls. Sources report that this process of "teasing= " FERC has not yet started. This is chiefly because California politicians= are focused on flat price caps, which FERC is very unlikely to impose. It= appears the state is asking FERC for the wrong measures, which is delaying= the process. The only way for the state to avoid these constitutional iss= ues would be for the state to purchase the utilities, as municipal entities= would not be subject to PUC regulation. However, there remains very signi= ficant opposition to this idea, especially on the Republican side. A state= purchase of the utilities would likely only gain momentum once Plan B bega= n to fail for the reasons cited above. Additionally, a state purchase of t= he utilities would be less expensive were both utilities in bankruptcy. Sturmwasser is a partner at Sturmwasser & Woocher, a Santa Monica law firm.= (His offices are on the top floor of the tallest building in Santa Monica= , overlooking the beach.) He has been a utilities lawyer for over 30 years= . His clients include the consumer advocacy group TURN (Toward Utilities R= ate Normalcy), among others. Sturmwasser will reportedly look for funding = to support the legal challenge, but if he cannot find money elsewhere, he w= ill likely be able to support it out of his own pocket.
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