California generators form creditors committee
Reliant Energy Inc., Dynegy Inc., and Mirant Corp. (formerly Southern Energy Inc.) formed a creditors committee late Friday to pursue 'options' to seek payment for millions of dollars in unpaid power bills from two near-bankrupt California utilities. Ted Olshanski, vice-president and utilities analyst at Bear Stearns & Co., New York, said recent developments are 'strongly negative' for California independent generators.
By the OGJ Online Staff
HOUSTON, Feb. 12--Reliant Energy Inc., Dynegy Inc., and Mirant Corp. (formerly Southern Energy Inc.) formed a creditors committee late Friday to pursue �options� to seek payment for millions of dollars in unpaid power bills from two near-bankrupt California utilities.
Since late January, generators have been supplying power without payment and waiting for the California legislature to work out plans to deal with the credit crisis afflicting the state�s two largest utilities. Pacific Gas & Electric Co., a unit of PG&E Corp., and Southern California Edison Co., a unit of Edison International, are operating under a rate freeze but must buy wholesale power at much higher costs amassing billions in debts.
The utilities, having missed some debt payments as well, have sued the California Public Utilities Commission (PUC) in federal court to force an increase in retail rates to pay their bills. The California PUC granted a temporary surcharge of less than 10% that was insufficient to pay the full cost of wholepower.
A hearing on the lawsuits is scheduled for today. Most observers don�t expect anything definitive to come out of today's hearing. At best some �language� may come out of the court that may provide guidance on how it is leaning, says Ted Olshanski, vice-president and utilities analyst at Bear Stearns & Co. in New York.
�Practically speaking, it will be difficult to get cash immediately to the utilities,� he said.
Rescue plans being debated in the legislature, including a state buyout of the transmission system, would give the utilities cash to pay for power. Lawmakers also have approved a bond issue intended to provide the state Department of Water Resources money to negotiate long-term power contracts.
But there is no assurance power delivered in the past several weeks to the California Independent System Operator (ISO) for which generators are not getting paid is included in any of these plans.
�This is all strongly negative for the generators,� he says.
In the past, they were more optimistic that they would get paid without bankruptcy proceedings, Olshanski explained. But efforts to resolve the crisis are moving so slowly the generators said they formed the creditors committee.
�As publicly held companies, we have a responsibility to our respective shareholders and must now examine our alternatives,� according to a statement released by the three companies.
Cash-strapped Pacific Gas & Electric Co. and Southern California Edison have accumulated $12 billion in uncollected power expenses. In January, the utilities stopped payments on certain debt and to the California ISO and the California Power Exchange.
The defaults on payments prompted generators to balk at continuing to provide power without being paid. A federal court judge in Sacramento has ordered generators to provide power through Feb. 16, even though there is no assurance of ever getting paid.