Generator reactions mixed over meeting with California governor

By Ann de Rouffignac
OGJ Online

HOUSTON, May 10 -- California Gov. Gray Davis said he asked generators to accept less than they are owed for past due wholesale electricity bills at a "share the pain" meeting Wednesday, but some generators who attended said the subject wasn't specifically addressed in the meeting.

Twelve generators and marketers participated in the closed door session at the governor's mansion.

In a press conference after the meeting, Gov. Davis said he asked generators to accept 70¢ on the dollar as one solution to the financial burden facing the state and the bankrupt and near bankrupt utilities.

However, officials with Reliant Energy Inc. and Dynegy Inc. said there was no discussion about paying the generators less than the full balance due. The governor has used numerous public and private forums to attempt to convince the generators to take a "haircut" on the billions of dollars they are owed by Southern California Edison Co. and Pacific Gas & Electric Co.

The state is in the process of cobbling together a bailout plan for Southern California Edison. Pacific Gas & Electric Co. has already filed for bankruptcy protection. The state also is in the process of raising the two utilities' consumer electricity rates and is about to issue $13.4 billion in bonds to help the state retire its own power bills.

"Haircuts were not discussed in the meeting," said Reliant spokesman Richard Wheatley. "The meeting was constructive and he [Davis] showed he was willing to listen."

On the whole, electric power providers selling into the California market appeared encouraged by the 4 hr face-to-face meeting with the governor. Generators and marketers said Davis was willing to listen and be constructive about the generators role in resolving the crisis.

Reliant repeated its proposal to sell 500 Mw of available power at 2¢/kw-hr for 5 years, if the state or some other creditworthy party provides the natural gas, Wheatley said.

A Dynegy spokesman called the forum useful and said the company will continue participating in future discussions with the governor. In one encouraging sign, the governor recognized other power sellers need to be involved in discussions other than just "Dynegy and Reliant," said Dynegy spokesman Steve Stengel.

The governor and other state agencies often publicly blame out-of-state generators, including Dynegy and Reliant, for draining billions out of the California economy.

Mirant Corp. said the meeting did include a discussion of the governor's 70¢/ plan. "We heard what he [Davis] had to say but we did not comment further," said Chuck Griffen, spokesman for Mirant.

Paula Hall Collins, a spokeswoman for Williams, said CEO Keith Bailey repeated an earlier statement generators will have to accept less than 100%. "We will be working with the governor to determine how much," Collins said.

In a statement Duke Energy Corp. said the company repeatedly requested meetings with the governor and has been prepared to engage in a "meaningful exchange." A spokesperson declined to discuss the specifics of the meeting.

Two weeks ago Duke confirmed it proposed a "global settlement" to the California crisis, including an offer to "share the pain of the troubled market on a fair basis with other market participants," in exchange for various concessions.

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