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California and the West

Energy Deal May Take a Month, Davis Tells Analysts

Power: Wall Street experts appear cool to governor, who tries to convince them he is solving the state's electricity crisis. California members of Congress vow to keep seeking wholesale price caps.


As a hopeful Gov. Gray Davis extended his East Coast barnstorming tour before skeptical Wall Street utility analysts Wednesday, members of California's congressional delegation vowed to continue their campaign for caps on wholesale electricity prices after a tense standoff with a top federal regulator.

Davis completed his five-day trip by raising about $200,000 for his 2002 reelection campaign at private events in Manhattan, and then conferring with analysts in an effort to persuade them that he is solving California's energy crisis.

Although Davis delivered some good news--that some electricity suppliers would accept less than the full payments owed to them by the state's debt-ridden utilities--he acknowledged that it probably would take more than a month to complete his plan to enable the utilities to stave off bankruptcy.

"Did they leave without doubt? I don't know that is ever the case," Davis said of his select audience of 35 analysts. "But I do believe they left thinking I'm sincere, I'm making progress, and am confident that I will fix it."

Reaction Varies

Analysts who attended the hourlong meeting came away saying Davis offered little that they didn't already know. Some questioned why he excluded many analysts who closely track utility bond debt, given that Southern California Edison and Pacific Gas & Electric Co. have defaulted on several bond payments.

Michael S. Worms, senior vice president of Gerard, Klauer & Mattison, described Davis as "very cognizant of the situation," adding that the governor appears to understand the fundamental problem that California lacks sufficient power plants to supply the populace.

"I got the impression he is on top of it. He understands the issues," Worms said.

Others were far less charitable. Davis' lack of specificity added to their skepticism.

"I'd like to see specifics," said Steven M. Fetter of Fitch Inc., which rates companies' credit-worthiness. "I didn't expect specifics, and he lived up to my expectations."

Davis told the analysts that some power generators have agreed to forgo full payments from the utilities. State regulators have barred Edison and PG&E from passing on to consumers the skyrocketing wholesale power costs charged by independent power generators and marketers, leaving the utilities owing billions.

Davis spokesman Steve Maviglio confirmed Wednesday that two generators made "unsolicited offers" to the governor to write off some of their debt. He did not identify the independent generators or say how much they would trim from their debt.

Representatives of the energy companies that have sold more than $1 billion in electricity to the state since January reacted coolly to Davis' suggestion that they not receive full payment for their goods.

"The best insurance against continued energy shortages is full payment for all deliveries that have been made in the past," said Gary Ackerman of the Western Power Trading Forum, a group of energy marketers and generators.

Davis last week said he and Edison had agreed to the outlines of a deal by which the state would give the utility $2.76 billion in exchange for its share of the statewide electricity transmission system.

At the time, he said he hoped to have a more detailed version of the plan by the end of this week, as well as one to buy transmission lines from San Diego Gas & Electric.

Fund-Raising Events

However, on Wednesday, the governor said a final agreement between the state and Edison will not be reached for as long as a month, maybe longer. A deal with PG&E, the state's largest utility, "could take a little longer," Davis said, adding that the company's debt is far larger than Edison's.

"This transaction is going to be scrutinized for decades to come," he said. "I'm determined to do it fairly but do it in a way that withstands scrutiny."

After conferring with Bush administration officials and attending a governors conference in Washington, D.C., over the weekend, Davis arrived in New York on Tuesday to be feted at a fund-raising dinner hosted by Richard Medley, an economic strategy consultant and head of Medley Global Advisors. On Wednesday, Davis attended a breakfast fund-raiser at the headquarters of the banking and financial services firm Citigroup, whose chairman, Sanford Weill, served as host.

The governor raised an estimated $200,000 in all for his 2002 reelection campaign, a source said, requesting anonymity. Neither Medley nor Weill could be reached for comment. Both men are significant political donors to national campaigns.

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