Neutered earlier this year by federal and state actions, theCalifornia Power Exchange (Cal-PX) late Friday filed for Chapter 11protection in the U.S. Bankruptcy Court, California CentralDistrict. The action came as another of the wounded in theCalifornia power crisis, Southern California Edison, told itsbondholders furtherÿrate increases for consumers are likely basedon the latest move last Wednesday by state regulators to assurethat all of the state water resource department’s (DWR’s) wholesalepower costs will be covered by utility rates,

The Cal-PX said its Chapt. 11 filing was made to “allow forbetter handling of services that the (state-chartered, non-profit)corporation still provides.” The state-created wholesale spotelectricity market operated from March 31, 1998 through Jan. 30this year.

“Despite today’s filing, Cal-PX will continue to honor itsresponsibilities to its customers, the courts, state of Californiaand the FERC,” the nearly defunct former spot market said in aprepared statement, adding that the bankruptcy filing “does notaffect utility power delivery, nor does it adversely impact theefforts of elected officials and stakeholders to find a solution toCalifornia’s electricity crisis.”

The 1996 state electric industry restructuring law establishedthe creation of the nonprofit Cal-PX as a means of setting amarket-clearing price for power. The state’s over-reliance on thespot market and regulators’ inability to allow California’s majorinvestor-owned utilities to buy power on a longer-term fixed pricebasis in the forward markets is widely recognized as a major causeof the restructuring nose dive last summer in the face ofunprecedented wholesale power price spikes.

Meanwhile, SoCal Ed in a conference call to bondholders saidthat contrary to the political rhetoric rejecting retail rateincreases as an option throughout the past four months ofCalifornia’s electricity crisis, the emergency state law (AB 1X)authorizing the state DWR to buy power for California consumersassures that the state’s power costs will be covered by utilityrates. Further, the California Public Utilities Commission in aninterim action March 7 has “essentially confirmed that it will passalong a rate increase” if that is what is determined is needed tomake DWR whole. It hasn’t determined that an increase is necessaryor how much is needed, but it did say rates will cover the DWRcosts.

Since the revenues the cash-strapped utilities now collect haveto cover three basic supply components — utility-ownedgeneration, qualifying facilities (QFs) and DWR’s purchases — andit is unlikely that the current 7.24 cents/kWh retail rate chargedby Edison can cover all three components, the prospect of furtherrate increases seems unavoidable. Lawmakers and other stateofficials last week were voicing similar thoughts, although Gov.Gray Davis continues to cling to the notion that he can avoidfurther increases beyond the 19% contemplated.

An administrative law judge’s decision related to the rate issueis expected on Friday and the CPUC will rule on the allocation andquestion of rates at its March 27 meeting. Edison financialofficials talking with bondholders indicated last Friday that it isunlikely the regulators would act before there is a comprehensivesettlement signed between the utilities and the governor.

The negotiations between the governor’s team and Edison weredescribed as “very active: and “intensified” on Thursday andFriday, but still short of a signed deal, according to Ted Craver,Edison senior vice president and treasurer.

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