Subject: california update 3 / 27 / 01
executive summary :
? undercollet remains sticking point for utility creditors ( especially qfs ) , involuntary bankruptcy likely if issue is not addressed in today ' s capuc hearings
? capuc rate increase set at 40 % , pending dwr power purchase details
? davis defends no rate increase position , distances himself from capuc
qf / generator undercollect may be an invitation to involuntary bankruptcy
as reported last week , qf has sitting and waiting to hear what the capuc has to say , unfortunately it may not be what the qfs want to hear . the utilities ' undercollect , which will not be addressed in today ' s capuc hearings , could very well provide an invitation for qfs and generators to file involuntary bankruptcy against socal and pg & e . recent rate hikes proposed by the capuc specifically dictate that any revenue generated from rate increases cannot be used to pay off utility past debt , leaving the qf with little hope of recovery . qfs were obviously dismayed by the capuc ' s draft order and if the decision is passed as it currently reads , an involuntary bankruptcy filing is still likely .
capuc holds rate increase hearings today
as reported yesterday , loretta lynch released the details of the capuc ' s draft rate increase order last night . there is expected to be a 3 cent / kwh surcharge on power bills or roughly a 40 % rate increase . a portion of this " surcharge " will be given to the dwr to cover its costs and the order concludes that utilities need revenues on a going - forward basis . therefore , utilities can only use the revenues for power purchases going forward and are expressly forbidden from using this cash to pay down past debt ( ex . qfs ) . however , the utilities are ordered to resume payments to the qfs on a going - forward basis . the net effect of the order is to allow the utilities to operate in case of bankruptcy .
one interesting point in the draft is its decision which calls on the utilities to join with the state in pursuing a refund on the amount overcharged for power by the generators . the suggestion is that the utilities take legal action against the generators to recoup funds . only the funds recovered from generators can be used to pay down the utilities ' past debt . if the utilities choose this course of action , it would be a very lengthy process .
davis contends with lynch on capuc rate increases .
davis has thus far refused to support capuc ' s proposed rate increase stating the capuc decision making board is an independent body and that he continues to believe that a resolution can be found within the current rate structure . sources indicate that he is likely to ask for lynch ' s letter of resignation , however , there is no indication she will comply . senator burton , who supports the capuc ' s plan , reportedly will protect lynch by not allowing her to be impeached ( which is the only other way she could be removed by the governor ) .