Thursday February 1 11:51 AM ET Calif. to Vote on Energy Plan As Utilities Fall

By Kenneth Barry

NEW YORK (Reuters) - The California Assembly was set to try again on Thursday to pass an energy rescue bill after it rejected the measure and sent the shares of the state's two major cash-strapped utilities tumbling on Wall Street.

The state Assembly in Sacramento, which narrowly rejected a bill aimed at resolving the state's energy crisis in the early hours Thursday, was to vote again on the measure later in the day, officials said.

The nation's most populous state has been hit by power blackouts in the past two weeks due to tight supplies of electricity. To meet demand, California utilities have been forced to pay skyrocketing prices for wholesale electricity on the spot market, and are not permitted to pass through to consumers under the state's 1996 deregulation law.

The bill would permit the state to enter long-term contracts with energy suppliers and issue bonds to cover the costs, but some lawmakers had objected to provisions they said would make electricity rate hikes likely.

Three Votes Short

The legislation had also set aside another $500 million to continue financing California's emergency power purchases on the volatile spot market.

The Senate had passed the measure 27-8 late Wednesday, but in the Assembly it fell just three votes short of the two-thirds majority needed to go to the governor.

On Wall Street, shares of Edison International and PG&E Corp. slumped in early trade on the New York Stock Exchange.

Southern California Edison, a unit of Rosemead, Calif.-based Edison International and Pacific Gas and Electric, a unit of San Francisco-based PG&E Corp., are facing bankruptcy after running up billions of debt buying power at high wholesale prices.

PG&E was down 40 cents, or about 2.8 percent, at $13.85, while Edison International dropped 53 cents, or nearly 4 percent, to $12.81.

Gov. Gray Davis, desperate to find a resolution to the power crisis bedeviling California, had promised to sign the bill as soon as it hits his desk.

The measure being discussed aims to relieve pressure on Southern California Edison and Pacific Gas & Electric, which have been unable to pass on to consumers higher costs of wholesale electricity under terms of the 1996 deregulation law.

State To Issue Bonds

Davis hopes to position the state's Department of Water Resources as the state's agent in the power market, signing long-term -- and relatively low priced -- contracts with suppliers. To pay for the power purchases, the bill would authorize the state to issue bonds backed by electricity revenues -- an amount that some estimates see hitting $10 billion.

Recent state-ordered audits into the books of the two large utilities and their giant parent companies painted a grim picture of their financial prospects.

Pacific Gas & Electric and its parent PG&E Corp faced a combined $700 million in short-term debt. Officials said it looked likely that the utilities would default.

The audit results explained how the utilities had transferred millions of dollars to their parent companies and were likely to fuel attacks by consumer groups on any taxpayer-funded rescue package for the companies.

In Washington, the head of the U.S. Senate Energy Committee suggested that the federal government might be forced to step in with funds if California cannot find a way for to pay for the energy it needs.

-- Swissrose (cellier@azstarnet.com), February 01, 2001