As Pacific Gas & Electric Co. announced Friday it wasdefaulting on payments to power generators, the state of Californiawas issuing an RFP to bankers for a plan to issue bonds to raise upto $10 billion to finance power purchases for the PG&E utilityand SoCal Edison. The banks have until Wednesday to respond.

According to a new California law enacted Thursday, the stateDepartment of Water Resources will use the funds to sign long termpower contracts which will be paid back over a number of years througha surcharge for utility ratepayers using 130% of baseline amounts ofelectricity (see Daily GPI, Feb. 2).

Meanwhile, the PG&E utility plans to pay on a pro-rata basisonly about 15% ($161 million) of payments due to qualifyingfacilities ($437 million) and the California Power Exchange andCalifornia ISO ($611 million).

The utility and its parent company, PG&E Corp., also said ina filing with the Securities and Exchange Commission that they havedefaulted on $726 million of short-term debt. Together they haveless than $1.2 billion of cash left.

PG&E said its intent is to “pay its ongoing costs of doingbusiness while seeking resolution of the wholesale power crisis.”In the meantime, it will examine restructuring its bank loans andcommercial paper. The company said it might take six months forholders of defaulted debt to get back their principal.

“Making limited payments is the only responsible step we cantake to ensure that the utility retains sufficient funds to allowessential ongoing generation and maintenance of both its gas andelectric transmission and distribution systems, as we work withlawmakers and regulators to reach a solution to California’s energycrisis,” said Gordon Smith, President and Chief Executive Officerof Pacific Gas and Electric. “We are committed to maintainingnormal operations and to paying as much of our outstanding powerbill as is available in rates, in a manner that seeks to ensure thesafety and reliability of power delivery.”

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