Los Angeles Times
The California energy crisis is hurtling along two tracks–one the slow lane of legislative politics, the other the hyper-speed autobahn of high finance.
As Stage 3 electricity alerts and billion-dollar debts mount, some travelers on those intersecting byways are strapping themselves in for what they see as a looming pileup, perhaps at the doors of the U.S. Bankruptcy Court.
Wall Street is becoming increasingly irritated with the deliberative pace of the California Legislature and Gov. Gray Davis and his months of unfulfilled vows of a remedy.
Those owed money by Southern California Edison and Pacific Gas & Electric said Wednesday that they cannot not wait forever to be paid.
“The pace of progress is not sufficient,” said Joe Bob Perkins, president of Reliant Energy, a major power supplier in the state. “Our accounts receivable from the past aren’t being taken care of and the bleeding is growing.”
In Sacramento, no immediate first aid is on the way.
Davis, who says he will announce his latest plan to solve the utilities’ financial meltdown on Friday, left little doubt on Wednesday that he intends to press for a state takeover of the massive electricity transmission system, despite its huge value to the utilities. But key legislators predict that, no matter what the governor proposes, they are at least two weeks away from passing legislation to improve the situation.
Bob Foster, the Edison official who oversees governmental affairs, said the question of bankruptcy is “a day-to-day thing. There are signs that creditors are getting increasingly nervous, increasingly impatient.”
“We were told last week that there will be a proposal from the administration, and we’re still waiting,” Foster said.
Senate President Pro Tem John Burton (D-San Francisco) said that if Davis and lawmakers cannot resolve the matter within the next two weeks, “we aren’t going to be able to solve it, and it will be in other people’s hands.”
Edison and PG&E have said they do not want to file for bankruptcy protection and will do so only if forced by their creditors. A prelude to bankruptcy, the formation of creditors committees, already has begun. Each utility can be forced into bankruptcy by as few as three creditors owed as little as $ 10,775 in unsecured debts, bankruptcy experts say.
“We respectfully believe that the state has less time than they might otherwise think,” Gary Dunton, president and chief executive officer of MBIA Inc., a firm that insures $ 1.3 billion of the utilities’ debt.
“If someone called me an hour from now to announce a bankruptcy filing ,” Dunton added, “I wouldn’t be surprised. We have been very clear that we are frustrated with the timing, and apparent lack of urgency.
“If you have 100 people cooking a stew, it may never be edible.”
Not everyone, however, believes that the prolonged legislative process will make much difference in the long run, despite the howls from creditors’ and utilities.
“I don’t sense that there is a sense of urgency,” said Assemblyman George Runner Jr. (R-Lancaster). Runner, like other legislators, pointed to repeated deadlines that have come and gone without a bankruptcy, and said: “Crying wolf can go so far.”
Some legislators blame Davis for the delays.
“The Legislature will pass enabling legislation. But people are waiting to hear from the governor’s corner office,” said Assembly Republican leader Bill Campbell of Villa Park, who has not conferred with Davis for a week. “We think it is serious. But it is a frustrating situation.”
Some lawmakers in Sacramento believe that not all the legislative gears are in sync, thus complicating progress. They say Davis has positioned himself politically so that the Legislature will carry the brunt of the blame when potential rate increases come into effect.
“The governor is out there saying no more rate increases and that he’s on the side of consumers, while we have to do the dirty work,” fumed an Assembly Democrat, who requested anonymity out of fear that his comments would only inflame an already tense relationship between the executive and the Legislature.
That irritation grew among Assembly Democrats when a poll they recently commissioned showed the Legislature’s approval rating had dropped 25 points, while Davis’ rating remained relatively high. The poll, conducted in late January by the Sacramento firm Moore Methods, showed Davis with a 45% approval rating, compared with only 25% for the Legislature.
Meanwhile, the cost to the state treasury of buying power is rocketing toward $ 2 billion, as the Department of Water Resources buys electricity because utilities are no longer able to borrow money.
“Giving away $ 2 billion that could have gone to build schools, housing, highways and help lower taxes for consumers . . . is a moral outrage,” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights.
In the meantime, the electricity bills–and defaults by the two utilities–continue to swell with no end in sight.
California’s power plant owners, already frustrated by the hundreds of millions of dollars they haven’t been paid by the state’s two biggest utilities, fear that the debt is growing by millions of dollars a day–even after the state ponied up taxpayers money to buy electricity for the utilities. That’s because power purchasers for the state are refusing to pay for all of the electricity that grid operators order on a last-minute basis to prevent blackouts.
Growing anxious over the slow pace of progress in Sacramento, generators are looking for help from the courts and from state and federal regulators. They won a victory Wednesday when federal regulators ruled that power suppliers cannot be forced to bear the risk that they won’t get paid when grid operators order them to supply emergency power.
Davis said Wednesday that the ongoing snags in buying power are being worked out. The lingering problem of the utilities’ estimated $ 12.7 billion in electricity debts, Davis said, can be fixed by the state’s purchase of the transmission grid. The money paid to the utilities for the grid–which would have to be negotiated–plus lease payments the state would make to the utilities to continue operating the 32,000 miles of high-voltage wires, would infuse the companies with enough cash to restructure their debt.
“We’re talking about a financial transaction that has value to both sides,” Davis said. “It has become increasingly clear to me that we cannot accomplish that without purchasing the transmission lines.”
Although Davis voiced his support of taking over the utilities’ moneymaking transmission system, he has not conferred with companies’ executives for a week. In fact, they learned of it from press accounts.
“It’s all just a giant game of chicken,” a top utility executive said, asking that he not be identified. “But I’m worried that the administration is going to overplay its hand and leave us with no options.”