-Yesterday's hearing confirmed imminent death of SoCal MOU
-Plan(s) B also drew little support; state "trust" for generators unlikely
-QF/SoCal negotiations are "treading water" as SoCal runs out the clock;
tries to postpone involuntary filing
-BK court unlikely to view SoCal payments to QFs as preferential because of
1. Few Signs of Legislative Support for SoCal MOU
Sources report that Bryson is in regular contact with many legislators,
but especially with Hertzberg and Keeley on the Assembly side (from which
the Plan B is being directed) and Bowen (Senate Energy Chairperson) on the
Assembly side. Sources believe that Bryson's comment may about the
legislature 'warming up to the MOU' may be a smokescreen; Democratic Senator
Alarcon said in the MOU hearing yesterday that the MOU is dead and is not
going to pass. Reportedly no one attempted to contradict him.
Members of the Chamber of Commerce, large energy users, TURN, the California
Manufacturers' and Technology Association (CMTA) and others also spoke out
against the MOU. (Sources found it remarkable that TURN and the CMTA, who
have been rivals in Plan B negotiations, agreed with each other in strongly
attacking the MOU.
2. Plan(s) B Are Still Foundering
The Plan(s) B were not discussed at the hearing, though some of the same
issues came up. For instance, it was discussed whether it was possible to
transfer all of Edison's obligations to a trust that pays out after the
conclusion of litigation. In the opinion of the governor's counsel and
other lawyers present, this is "shaky," especially without the consent of
creditors. In their opinion, there would have to be an agreement that would
pay off everything.
The governor's counsel stated there were constitutional problems with setting
up a trust for what the generators are owed, then letting them litigate over
the trust. Also, he stated that it was not feasible for the state to be
offering generators cash on the one hand while the FERC negotiated with them
to refund the state for power
purchases (as ordered in the FERC decision Monday). The governor's counsel
stated that the only reasonable thing for the state to do was to give the
generators their cash, then sue them for it.
3. QF/SoCal Negotiations Are "Treading Water"
QF sources suggest that the debate between SoCal and the PUC as to whether
the QFs should be paid 10% or 15% of what they are owed is "not a real
question," but rather a stalling measure allowing SoCal to hold on to cash
in advance of a filing or a global solution. "SoCal is just treading water,"
said a source.
4. SoCal Payments to QFs Unlikely to be Viewed As Preference Payments
Sources also comment that SoCal payments to the QFs likely would not be
seen as a preference payment in bankruptcy court because they were ordered
by a state agency, the PUC. However, comments made in the SoCal conference
call yesterday seem to indicate that Solomon Smith and perhaps other
creditors may see the payments this way and may be willing to sign a