S&P cuts rating on California bonds By Myra P. Saefong, CBS.MarketWatch.com Last Update: 5:31 PM ET Apr 24, 2001 Copyright C.B.S., Fair Use for Education and Research Only NEW YORK (CBS.MW) - Standard and Poor's lowered its rating on California's general obligation bonds by two notches Tuesday, citing concerns over the final costs and reimbursement issues related to the state's ongoing energy crisis.

The ratings agency dropped the rating on the general obligation (GO) bonds, which help cover costs for schools, roads and community centers among other things, to a single-'A'-plus from double-'A'.

S&P said the state's GO bond rating continues to remain on "CreditWatch" with "negative implications," where it was placed on Jan. 19 shortly after the state began purchasing power to avoid blackouts.

The state was forced to make power purchases on behalf of the state's biggest utilities, Southern California Edison (EIX: news, msgs, alerts) and Pacific Gas & Electric (PCG: news, msgs, alerts), because of their inability to procure enough electricity to cover customer demand.

The utilities suffer from more than $13 billion in debts combined, paying high prices for power on the spot wholesale market that they can't recover under state-capped retail rates.

The latest rating downgrade "reflects the mounting and uncertain cost to the state of the current electrical power crisis" as well as its likely long-term detrimental effect on the state's economy," S&P said in a press release.

Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

Hyperlink: http://cbs.marketwatch.com/news/story.asp?print=1&guid={B537F5F9-32B3-42B6-8600-321BFE1877F5}&siteid=mktw

This is a major "milestone" in California's inexorable march towards total insolvency and then some form of bankruptcy. The System of Payments, upon which civilization depends, may well be put under unprecedented stress before the "Y2K Bug Flood" crests.

-- Robert Riggs (rxr.999@worldnet.att.net), April 25, 2001

Answers

As long as there is no cap on the cost of electric, its just a matter of time before CA goes bankrupt OR they will have to double the cost of electric and then double it again. Sounds like a lose/lose proposition. I'm just glad I don't live in CA, WA, OR, MT or NV. But I suppose I'll be next in AZ. Last months home electric was $29.48 for 287 kWh for a 30 day period.

-- Guy Daley (guydaley@altavista.com), April 25, 2001.