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However, getting from here to there will involve some painful adjustments, he warns, and "monetary medicine" from the Fed won't stop the pain this time.
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According to the econometric model used by UCLA's forecasters, the probability of a 2001 recession has increased nearly 30 percent since December 2000.
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Just three months ago, Dr. Leamer's forewarning of a recession was the most pessimistic -- and, as it turns out, the most accurate forecast made that quarter.
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"The expansion of 1999-2000 was driven by 'New Economy' investment opportunities. Firms rushed pell-mell to be the first kid on the block to have a cool website. Fear was a big motivator. Internet firms feared losing first-mover advantage. Bricks-and-mortar firms feared they would lose out to pure Internet business models. Almost every enterprise in the U.S. invested heavily in IT equipment and software, and hired the associated personnel," said Dr. Leamer.
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"Things are different now."
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The national recession and slowdown in investment in information technology and software has different implications for the principal regions of California.
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A recession is quite likely for the Bay Area, while Southern California will experience many economic stresses though skirting an outright recession.
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Dr. Tom Lieser, author of the California Forecast, expects to see a "high-tech" recession in California that will have a disproportionate impact on the San Francisco Bay Area.
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"We will most likely see not only a slowing of demand for electronics, communications equipment and related products, but also a weeding out of the less well-capitalized firms in these industries," said Dr. Lieser.
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The UCLA economist also expects a weak expansion in employment through 2002, with a corresponding rise in unemployment rates.
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A substantial slowdown in the California service sector -- a mainstay of the state's economic growth -- is also quite likely.
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"The strong increase in residential building permits seen during the November-January period will likely be short-lived," said Dr. Lieser.
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"We expect to see declining home prices in the Bay Area this year. Southern California will also experience slower home sales and a lower rate of price increases."
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Higher energy prices, the economists argue, may pose a greater problem for other states than for California, because of the state's lower per capita consumption.
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On a per capita basis, California ranked 49th out of 50 in electricity consumption and 26th in natural gas consumption, both in 1999.
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Even with the state's notorious dependence on the automobile, it still ranks only 15th out of the 47 reporting states in per capita gasoline consumption.
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And while the recent brownouts and blackouts may not perceptibly affect California incomes and employment in the short term, a prolonged electricity crisis could discourage business expansion significantly in the longer run.
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The UCLA Anderson Business Forecast is the most widely followed and often-cited forecast for the state of California, and was unique in predicting both the seriousness of the early-1990s downturn in California and Southern California, and the strength of the state economy's rebound since The Forecast was presented at an all-day conference at Korn Convocation Hall at The Anderson School at UCLA.
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In addition to providing the outlook for the state and national economy, the conference examined the economic impact of California's energy crisis through a series of panels led by some of the nation's most prominent authorities.
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Speakers included Loretta Lynch, president of the California Public Utilities Commission, Mark Bernstein, senior policy analyst at RAND Corporation, Barry Sedlik, manager, economic and business development, Southern California Edison, and Joseph M. Otting, executive vice president, Union Bank of California.
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FYI: The State Treasurer Phil Angelides announced that the melded interest rate on the bonds that he intends to issue (mix of taxable and tax-exempt) will be 5.38%.
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Best, Jeff
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Thanks very much, Scott.
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Appreciate it.
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Best, Jeff
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Great job.
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Congratulations.
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Jeff
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Not that I've heard.
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I think that we'll have to wait for the public notice (which will provide the details) to determine that piece.
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Poll thus far: Aron Thomas (AES) just decided not to file.
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He made the decision after talking to Edison, who told him that Edison is going to suggest in its filing that the surcharge be applied--get this--to the PX credit; thus, ESPs would pay, but then get it back through the credit (can you say "poor quality receivables"?).
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Aron feels that the issue should be figured out in work shops and the Commission should not decide it in the policy phase.
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Bill Booth (CLECA) is going to remain silent on the issue because he doesn't know what the position of his members is.
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Keith McCrae (CMA) is going to say that 1) the surcharge should not apply to direct acces customers and 2) the governor stated publicly that he supports direct access.
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Jeanne's checking with the Industrial Users Group to see what they're going to say.
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Since CMA is going to ask for clarification, I would suggest that we remain silent and focus on the other rate design/cost allocation issues, e.g., equity, no cross subsidies.
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Thoughts?
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I let you know what I hear back from Jeanne.
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Best, Jeff
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300 pm cdt works for me.
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Sounds good.
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Energy supply setback: Big generator can't be forced to sell emergency power to the state, a U.S. court rules.
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By Denny Walsh and Carrie Peyton BEE STAFF WRITERS (Published April 6, 2001) In a development that does not bode well for California's energy supply, a federal appellate court Thursday halted enforcement of a lower court order that a big electricity generator must sell emergency power to the state without guarantee of payment.
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State energy officials said the ruling wouldn't have any immediate effect but could precipitate a power emergency if the generator decided to take a plant off-line for maintenance.
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On March 21, citing "rolling blackouts (that have) darkened the California landscape," U.S. District Judge Frank C. Damrell Jr. imposed an injunction against Reliant Energy Services Inc., one of the nation's major generators.
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Houston-based Reliant controls approximately 3,800 megawatts, or about 20 percent, of the gas-fired generation capacity in the state, and Damrell found that loss of that production "poses an imminent threat."
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But Thursday, a three-judge panel of the 9th U.S. Circuit Court of Appeals granted an emergency stay of the injunction, saying Reliant has shown "a high likelihood of success on the merits" of its appeal.
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While not spelling it out, the panel apparently bases its finding on the question of the courts' jurisdiction over the energy market.
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The panel directed that a hearing on the appeal be scheduled for the second week in July.
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The decision leaves California's electric grid more fragile, at least temporarily, according to the state Independent System Operator, which maintains and controls power transmissions.
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It gives the agency no immediate recourse if Reliant chooses to shut down any of its plants for maintenance, said ISO Vice President Jim Detmers.
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"It's not going to change anything overnight, and it's not going to change anything over the weekend," said Detmers.
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"But if Reliant decided on a unilateral action to take their units off for maintenance ... we definitely could have a system emergency."
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Reliant officials, when told of the ruling, took a conciliatory tone but declined to specify their next move.
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"Reliant ... has pledged to keep the lights on in California," said company lobbyist Marty Wilson, and "is still of a mind to want to cooperate."
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Without further comment, the appeals court judges cited a 1980 U.S. District Court decision.
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In that case, 14 cities sued Florida Power and Light Co., alleging that it was violating a number of laws in its sales of power and production of electricity.
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The judge found, however, that the Federal Power Act reserves oversight of interstate utilities exclusively to the Federal Energy Regulatory Commission.
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He ruled that only the commission may bring an action involving energy sales into federal court -- unless it is a request to review a commission order, and that goes directly to an appellate court.
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The lawsuit before Damrell was brought by the ISO to force Reliant and two other generators to respond to ISO's emergency orders for power, even though the agency is buying on behalf of two retailers that are broke and hopelessly in debt.
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Because Pacific Gas and Electric Co. and Southern California Edison can't pay their bills -- about $14 billion -- some wholesalers want to cut off sales to the utilities.
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The other three defendants in the ISO's suit -- Dynegy Power Corp. of Houston and Tulsa-based AES Corp. and its marketer, Williams Energy Marketing & Trading Co. -- have entered into written agreements with ISO to continue supplying emergency power until the FERC decides whether they are required to sell to companies that are not creditworthy.
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But Charles Robinson, ISO general counsel, points out that the generators can rescind those agreements with 48 hours' notice.
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"My hope is this is a temporary setback," said Robinson.
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He added, however, that the practical effect is "at least for now, we don't have a tool to compel them to do what we believe they're obligated to do" -- respond to emergency demands for power.
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Reliant has insisted since the suit was filed Feb. 6 that Damrell has no jurisdiction over the rate schedules that govern dealings between generators and the ISO, and that the Federal Power Act mandates that the FERC must settle any disputes about terms of those tariffs.
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In issuing the injunction, Damrell acknowledged that the FERC has special expertise concerning agreements between generators and ISO.
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"Absent the extreme exigencies of the California power crisis, the court agrees that a stay pending further action by the FERC would be proper," he said.
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"But those are not the facts here. Electricity is in critically short supply. The health and safety of the people of California are potentially at risk."
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Immediately upon receiving the 9th Circuit's order Thursday, attorneys for the ISO asked Damrell to set an accelerated schedule for its motion to amend the suit.
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The agency apparently has crafted a new complaint stressing its view that the matter is an ordinary contract dispute over which the judge has jurisdiction.
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Damrell scheduled a hearing on the motion for Thursday.
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In a further development that could complicate the state's dire need for energy, an alternative supplier won a court fight Thursday to bypass the big utilities and sell its power on the open market.
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Timber giant Sierra Pacific Industries, which operates four biomass plants that produce power for PG&E, obtained a temporary restraining order in Sacramento Superior Court that says Sierra Pacific is not required to sell its power to PG&E.
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The ruling means PG&E and Southern Edison could lose power as alternative energy generators, fed up with months of nonpayment, sue to be able to sell their comparatively cheap product elsewhere, including outside the state.
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Thanks.
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Where'd you hear and do you have any more info?
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Best, Jeff
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FYI.
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Reuters -& CNBC *PG&E SAYS PACIFIC G&E FILED FOR CHAPTER 11 VOLUNTARY BANKRUPTCY RELIEF NEW YORK, April 6 (Reuters) - Pacific Gas & Electric Co., which is California's largest investor-owned utility and has been struggling with that state's power crisis, said on Friday it filed a voluntary petition for bankruptcy protection with the U.S. Bankruptcy Court for the Northern District of California.
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Trading was halted in PG&E shares on the New York Stock Exchange before the filing.
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They last traded at $11.36, down 2 cents.
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The Chapter 11 filing was disclosed in mirror filings by the utility and its parent, San Francisco-based PG&E Corp. , with the Securities and Exchange Commission.
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The utility said in the filing that it "retains control of its assets and is authorized to operate its business as a debtor in possession while being subject to the jurisdiction of the Bankruptcy Court."
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A 1996 state utility law deregulated wholesale prices but capped retail prices.
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Pacific G&E has said it accumulated more than $8.9 billion of back debts because a rate freeze prevents it from passing on its soaring wholesale power costs to consumers.
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ADVISORY/Pacific Gas and Electric Company to Hold Media Teleco OTC HALT NEWS PENDING LAST $11.36
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We'll make up the difference for you and Eldon.
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Prentice is doing some independent research.
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FYI, I've faxed PG&E's filing to Rick Shapiro.
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If others don't have it and want it, let me know and I'll fax it.
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The filing's brief--about 10 pages--with more detail apparently to be filed.
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It lists the top 20 creditors.
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The only ENE listing in the filing is ENE Canada at $28M.
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The other thing that Governor and his PUC could have done many months ago was realign rates to more accurately reflect the real cost of power.
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That arguably was a key determinant driving PG&E to Bankruptcy.
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Jeff
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deadline is monday for the story.
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FYI.
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