In the News: Recent Developments

April 5, 2001

Calif. Governor’s Aides to Brief Securities Analysts

(Sacramento, California) Wall Street analysts said they will speak to California Governor Gray Davis’s advisers following his speech tonight on possible remedies for the state’s power crisis.

Analysts from credit-rating companies Moody’s Investors Services and Fitch said they received an invitation to participate in a conference call. It is scheduled for 6:45 p.m. California time, said Kit Konolige, a utilities equity analyst at Morgan Stanley Dean Witter.

The conference call “adds the impression that there will be some meat to the governor’s speech, but we will wait and see,” Konolige wrote in a research report.

A shortage of electricity this year has brought rolling blackouts to the state, where utilities are near bankruptcy after partial deregulation of the power market. The governor’s office said Davis plans to make an “important announcement” about the state’s energy crisis during the televised address tonight.

Governor’s Speech

Steve Maviglio, spokesman for the governor, said Davis would talk about possible consumer-rate increases, the need to keep the state’s utilities solvent and conservation efforts. The speech is scheduled for 6:05 p.m., San Francisco. The governor’s press office didn’t return calls seeking comment today.

“I don’t know who is invited to be on the call, who from the governor’s side will be on it, who will be leading it, or even if the governor will be on it,” said Dan Ford, a utilities equity analyst at Lehman Brothers.

The conference-call invitation, addressed to members of the financial community, didn’t contain any details about who would be participating.

“It will probably be a similar crowd and structure to what he did in New York, Ford said. “Why would he hold a conference call to deliver bad news to analysts?”

On Feb. 28, Davis had a closed-door, invitation-only meeting with analysts in New York. At the time, the governor reminded analysts of how well he was doing in popularity polls and said he intended to ask power generators to accept partial payments.

Major Announcement?

Analysts said tonight’s speech needs to have more substance to impress investors.

“The only thing that would justify calling that much attention to himself would be to announce a deal with at least one utility,” said Carl Danner, a consultant with Wilk & Associates/LECG, in San Francisco. Danner was chief of staff to Mitch Wilk when he was president of the California Public Utilities Commission.

PG&E Corp., Edison International and Sempra Energy utilities are negotiating to sell their power-transmission assets to the state, in exchange for billions to help them pay debts. Pacific Gas & Electric Co. and Southern California Edison, the state’s two largest investor-owned utilities, have more than $14 billion in power-buying debts.

“I don’t believe they’re going to have a deal to announce tonight,” Lehman’s Ford said. “He’ll probably crow about the bank funding the state secured last night, about the need for conservation, and about boosting output for the summer.”

Deal with Edison?

Joseph Fichera, a top state adviser, said negotiators are close to striking a deal with Edison International, the parent of Southern California Edison, to purchase its transmission lines for $2.6 billion.

On a conference call on Tuesday for investors holding the utility’s defaulted debt, Ted Craver, Edison’s chief financial officer, described the negotiations only as “very active” and “at a critical point.”

The utilities are concerned they run the risk of assuming more debt because of the purchases. The state’s Department of Water Resources has been purchasing power on the utilities’ behalf since mid-January.

The state must be responsible for the full shortfall of power-purchasing costs that customer rates don’t cover, Craver said. That’s “one of the most important principles discussed in conversations with” Davis’s aides, he told investors.

–Liz Goldenberg in the New York newsroom at (212) 893-3940 or at, Daniel Taub in (Sacramento, California at (310) 770-1292 or at, and Anna Marie Stolley in San Francisco through the San Francisco newsroom (415) 912-2980/dfr

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