Reliant frets over spread of California utility credit problems

Reliant Energy Inc. Friday asked federal regulators to stay a decision by the California Independent System Operator (ISO) to relax credit standards for utilities that buy power through the grid operator.

Separately, the Houston energy company reported it is taking a $39 million reserve against receivables from energy sales in California. The company also reported adjusted earnings for 2000 were $838 million, or $2.94/share, compared to $508 million, or $1.78/share, for 1999. It attributed the gain to strong performance its unregulated wholesale energy businesses and increased customer demand in its regulated electric service territory.

In its Federal Energy Regulator Commission (FERC) filing, Reliant said it is worried the near-bankrupt utilities could affect power suppliers across the entire western region. The company was responding to a California ISO filing earlier this month that sought to modify a tariff by eliminating the need for the utilities to provide payment security to purchase electricity. Reliant says this will force electricity suppliers to take on greater financial risk on sales in the California market.

Relaxed credit requirements
The ISO petitioned FERC to permit a relaxation of the credit requirements after credit ratings agencies downgraded the ratings of Southern California Edison Co. and Pacific Gas & Electric Co. Reliant asked FERC for reasonable assurances suppliers will be paid for power deliveries.

�The existing credit situation is not sustainable and must be remedied. It is not unreasonable to be asked to be paid for services rendered,� said Steve Letbetter, chairman and chief executive officer, in a release.

Letbetter said the existing credit crisis of the state�s largest investor owned utilities is not sustainable, but he sees little effort by the state to resolve the crisis.

The company said earnings for the fourth quarter of 2000 were $73 million, or 25�/share, compared to $73 million, or 26�/share, for the same period of 1999. Adjusted earnings for both years exclude the results of the company's investments in Latin America, which are classified as discontinued operations.

For the year, the company said its wholesale energy group, which includes unregulated power generation and energy trading and marketing activities in North America, produced operating income of $482 million in 2000, compared to $27 million in 1999.

The wholesale group also reported equity income, which is included in other income, of $43 million for 2000, compared to an equity loss of $1 million in 1999. Additional operations in the MidAtlantic, Midcontinent, and Southwest regions, as well as higher energy sales and prices contributed to the substantial increase over 1999.

For the year, Reliant Energy HL&P generated operating income of $1.23 billion, up from $981 million for 1999 on higher demand and lower depreciation and amortization.