No Sale in Sight for State’s Long-Delayed Bond Package
By HOWARD FINE
Staff Reporter
A full 14 months since it was first promised, the state has yet to sell its multibillion-dollar bond package to reimburse the budget for power purchases made at the height of last year’s energy crisis. And it looks like it will be several more months at least before the bonds get sold.
At stake is $6 billion that the state spent last year out of its general fund to buy the power on behalf of insolvent utilities. The bond package, now estimated at $11 billion to $12 billion, would have electricity ratepayers pay back that $6 billion, plus several billion more for power purchases the state has continued to make even after the crisis subsided.
As of now, that $6 billion is not considered part of the state’s budget, since it’s supposed to be repaid. However, if the bond sale is postponed long enough into next fiscal year, beginning July 1, that $6 billion could get added to the already whopping $20 billion to $22 billion state budget deficit.
A supposed breakthrough was reached in February when state power regulators reached agreement with the three major utilities on a power rate structure to repay the $11 billion to $12 billion of bonds.
But since then, a couple of issues have cropped up and any bond sale is now at least five months away, if not longer, according to the office of state Treasurer Phil Angelides, who eventually will have to take the bond package to Wall Street.
For starters, the state Public Utilities Commission must reach an agreement with Pacific Gas & Electric over how the rate revenues are to be turned over to the state. The PUC reached similar agreements last month with Southern California Edison and San Diego Gas & Electric. However, since Pacific Gas & Electric is in Chapter 11 bankruptcy protection, any agreement with that utility must first be approved by the Bankruptcy Court. That approval is expected in the next few weeks.
The other issue is more complex and could take longer to resolve. Pacific Gas & Electric’s parent company, PG & E; Corp., has filed suit against the state Department of Water Resources, the state agency that made the power purchases last year and is the listed seller of the bonds. PG & E; spokesman Ron Low said the suit demands the DWR hold a public hearing to discuss the level of revenues the agency needs to collect to refill state coffers.
“The public has a right to know what the justification is for the amount of revenues that need to be collected, and whether that amount is fair and reasonable,” Low said.
DWR spokesman Oscar Hidalgo said the agency does not need to hold such a hearing, since the issue was discussed in February when the Public Utilities Commission reached agreements with the utilities on the power rate structure.
There’s a chance that resolving this issue could reopen agreements on the power rate structure and could impact the revenue stream used to pay back the bonds. Until the dispute is resolved, Treasurer’s office officials say, they cannot take the bond package to Wall Street.
“Any court challenges must be satisfactorily resolved,” before investors can purchase the bonds, Angelides said in a press release. Angelides was out of the state last week and could not be reached for further comment.
But officials in the Treasurer’s office indicated that even once these two issues are resolved, it will still take three or four months to prepare the bond package, which would be one of the largest government bond issues ever sold in the U.S.
