Well, we beat the wires by a good three hours on this one. Note the comments
about Reliant not accepting anything less than 100% of its debts.
Calif Assembly GOP Releases 'Plan R' To Rescue Elec Utils Updated:
Wednesday, May 23, 2001 04:14 PM ET
LOS ANGELES (Dow Jones)--California's Assembly Republicans on Wednesday
released "Plan R", an alternative to Democratic proposals on how to restore
the state's financially struggling utilities to solvency.
The plan put forth by the Republicans, who are in the minority in the
Assembly, would have Edison International, Southern California Edison and
PG&E Corp. pay down debts by way of a dedicated-rate component taken from
existing utility rates, including a rate hike effective March 27.
Plan R would also increase the utilities' future return on investment, and
allow for cost recovery in the future, a press release said. The utilities
have incurred more than $14 billion in undercollections because under a rate
freeze they couldn't pass high wholesale power costs to customers. Utility
rates are frozen through March 2002, unless state regulators decide to lift
the freeze sooner.
To help lower rates, utilities would be required under Plan R to produce
more short-term and long-term power as well as sign long-term contracts to
hedge against real-time price spikes. Lower rates would also come from
negotiating reduced prices for power bought from qualifying facilities and
from negotiating with larger generators to accept only 70% of the money they
are owed for past power deliveries.
"The critical element (of a 30% concession) must come from the governor's
leadership," said Assembly Republican leader Dave Cox. "Republicans aren't
going to support any plan without a comparable negotiated concession from
generators by the governor."
The governor met with generators two weeks ago and asked them to accept 70
cents on the dollar from utilities. Most haven't said definitively whether
they are willing to accept those terms, although Reliant (REI, news, msgs)
has flatly refused to accept less than 100%.
Plan R is a response to Gov. Gray Davis' plan to buy SoCal Ed's transmission
lines for $2.76 billion and to help the utility issue $3 billion in bonds
backed by ratepayer revenue.
"The Republican plan is a shared solution that delivers more power to the
grid. The governor's plan socks ratepayers with a staggering bill for
transmission line junk," said GOP Assemblyman Keith Richman.
Davis' agreement with SoCal Ed, announced more than five weeks ago, has
gotten a cold reception from Democrats as well, who have proposed several
"Plan B" alternatives, two of which are being taken more seriously than
One would have the state hold a five-year option to buy SoCal Ed's
transmission lines for their $1.2 billion book value, and would allow the
utility to sell bonds backed by ratepayers for an amount determined by state
regulators. That plan would also require the utility's creditors to accept
75 cents on the dollar for money owed.
The other Plan B would allow Pacific Gas and Electric to issue bonds secured
by their assets and use the revenue to pay creditors. In turn, the utility
would pay an assessment, essentially a tax that would be used to service its
The Republicans' Plan R applies to both utilities, a spokeswoman for the
Assembly Republican Caucus said. It is meant, in part, to move things
forward, because the Democratic proposals have encountered slow going as of
late, both Democrats and Republican lawmakers say.
"Plan B has become Plan Backtrack," Cox said. "It is time to consider other
But the Republican plan doesn't really offer much that is new, noted one
consumer advocate. Democrats are already pushing for generators to accept
less than what they are owed, as well as for long-term contracts and
qualifying-facility price reductions, said Michael Shames of the Utility
Consumers' Action Network.
"The irony of the Republican proposal is that it is remarkably similar to
the one being developed by the Democrats. It would appear as though the
Republicans are trying to use a trick that Bill Clinton mastered - taking
the opposition's idea and calling it his own," Shames said.
The plan also doesn't explain how or why utilities would want to get back
into regulated generation, vis-a-vis requiring them to produce more supply,
Shames said. As well, funding the plan within current rates isn't possible,
"The bottom line is, the Republicans aren't pushing anything new or
exciting. And in one case (funding within give rates), not even feasible.
But I'm glad they are trying. I just wish they'd try harder to do something
in a bipartisan way rather than play political games with the truth," Shames