Subject: california update 2 / 20 / 01
bankruptcy
today , california energy operating corporation sued southern california edison seeking payment for november and december power sales , totalling $ 45 m . this move is likely a sign of things to come . it shows that generators do not believe that there will be a viable solution from the governor . calenergy is positioning themselves as a primary creditor . past experience dictates that lawsuits are often used as a means of communication in bankruptcy situations . in the case of a judgement in calenergy ' s favor , calenergy would be able to seize edison ' s bank assets assuming there is no bankruptcy in the meantime . it is another strategy for getting paid without actually filing an involuntary bankruptcy . however , if there are enough of these suits or if edison ignores a judgement in calenergy ' s favor , it will very likely be enough to trigger an involuntary bankruptcy filing , followed closely by a voluntary filing . the generators are stating that they will not subscribe to any deal until their past bills are paid . there currently is no arrangement to pay the generators for power they are supplying to the iso . thus , the generators are beginning to see the utilities and the state as one and the same .
the governor is reportedly trying to come up with a plan that will result in the lowest possible rate increase in order to minimize the public ' s reaction . the governor has stated that he will put a plan in place in accordance with the " existing rate structure . " according to rosenfield , he is considering a 19 % rate increase . this number was arrived at by combining the 9 % temporary , emergency increase passed by the puc and a 10 % rate reduction imposed by the legislature under bill ab 1890 that is scheduled to expire next month . this increase would be put in place for as long as necessary to pay back the utilities ' debt . this plan contrasts enacting a 30 % or 40 % rate increase over a period of a few years . a lower increase over a longer period of time , coupled with the financing charges over that same period , is likely to have a detrimental effect on the california economy in comparison to its neighbors .
consumer advocacy group
the consumer groups continue to insist that the generators give something up as part of any deal . according to a source close to harvey rosenfield , head of a leading consumer advocacy group in california , rosenfield feels the longer it takes the governor to flesh out a deal with the utilities , the lower the price offered for the transmission assets will be . this is due to public pressure on elected officials not to enter into a bailout agreement ; the pressure will only increase as time passes