San Diego Union-Tribune
(Page A-3 )
CALIFORNIA POWER CRISIS
Davis ends buyout pitch on high note
COPLEY NEWS SERVICE
NEW YORK -- Ending a whirlwind three-day visit to the East Coast, Gov. Gray Davis yesterday pitched his plan for a state takeover of transmission lines
from debt-ridden utilities to dozens of skeptical Wall Street analysts.
After the 45-minute, closed-door meeting, Davis left for home saying he felt upbeat about the state's plans to "revitalize the utilities."
But financial experts after the meeting said they felt as anxious as ever.
Davis conceded as much.
"Did they leave without concerns?" Davis rhetorically asked a gathering of reporters later outside the Cornell Club. "I don't know if that's ever the
Davis said he expects the state to complete deals with three major financially troubled state utilities as part of California's effort to take
over the transmission power system. Last week, the state struck a tentative
deal to acquire Southern California Edison's transmission system for $2.76billion, and is trying to negotiate similar deals with San Diego Gas
and Electric and Pacific Gas and Electric.
The plan is intended to help the utilities pay off about $13 billion in debt that they have accumulated under a deregulation plan that required
them to buy power at wholesale prices, but limited what they could charge their customers.
Davis made his presentation to about 35 representatives of some of Wall Street's top financial powerhouses, among them Standard & Poor's, Bank of America, Goldman Sachs, Merrill Lynch and others. The governor spoke for
about a half-hour before the analysts started questioning him during the closed-door session, said some attendees.
"I think he feels (the state) is in a very sensitive point of time," said Steve Fetter, head of global energy for Fitch financial group. "He has a
preliminary agreement with Southern California, and he thinks San Diego will offer its transmission lines and within 30 days he can get Pacific Gas
and Electric. He thinks he needs all three to do the deal."
The analysts "had a lot of questions, and there was only time for a handful," Fetter said. "Just how is the deal going to come together? And
there was concern about consumer groups and possible initiative actions. But the governor is confident he can pull it together and succeed with the
sale of transmission lines, and do it within the existing rate structure."
Analysts "are worried about the questions of bankruptcy, financing and all that. Some things are reassuring, other things weren't," said Lawrence J.
Makovich, senior director of Cambridge Energy Research Associates.
"What isn't: It does not appear they are doing everything necessary to avert serious shortages this summer."
The analysts also were concerned because "most people don't have confidence they are going to make money in this California power market," Makovich
"This market still has structural flaws that haven't been addressed."
Davis' meeting yesterday marked the last in a series for the governor, who pitched his plan to Energy Secretary Spencer Abraham on Tuesday after
arriving for the National Governors Association meeting in Washington.
Standing outside in frigid New York, Davis said part of his effort is to dispel the message that "Californians just sit in their hot tubs with their