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NEWS RELEASE
Oct 17, 2000


CONTACT: Doug Heller - 310-392-0522 x309

California Utilities Trying to Steer Wall St. On Rate Recovery

Move at CPUC: Cover for Report to Investors
Facing an inescapable legal roadblock to recovering their alleged losses on power purchases, California electric utility companies are hoping state regulators will give them cover to lull investors into believing ratepayers will ultimately foot the bill.

Claiming they have lost billions as a result of skyrocketing electricity prices under deregulation, the utilities are desperate to convince skeptical Wall Street analysts that they'll eventually recover these "losses" -- even though the CPUC has rejected the utilities' arguments on five separate occasions, and has been upheld by the Court of Appeal.

The utilities are required to report to investors and Wall Street analysts on the latest developments in SEC 10-Q reports due later this month. Under standard accounting rules, the utilities must write off the power payments as losses, unless it is "probable" that the company will be allowed to recover the amounts.

The Financial Accounting Standards Board's (FASB) Statement 71 requires:
"If a regulator excludes all or part of a cost from allowable costs and it is not probable that the cost will be included as an allowable cost in a future period, the cost cannot be expected to result in future revenue through the rate-making process. Accordingly, the carrying amount of any related asset shall be reduced to the extent that the asset has been impaired." FASB Statement 71 10

The utility companies have filed emergency petitions asking the state Public Utility Commission (CPUC) to suspend its prior decisions barring the utilities from passing the unexpected costs on to ratepayers. Southern California Edison, in its October 12, 2000 request for a suspension, states: "the investment community is expressing growing concern about the eventual recovery of the TRA balance. The Commission must take action which will, at a minimum, send the right signal to the financial markets."

The utilities are hoping that the CPUC will take action at its Thursday meeting in Los Angeles. The utilities will then use the suspension as justification in their quarterly reports to avoid write-offs -- even though a suspension, considered highly unlikely, would not lead to a change in the previous decisions issued by the CPUC and the courts.

"We doubt the CPUC will agree to become complicit in the utilities' scheme to convince investors there's yet another pot of gold at the end of the deregulation rainbow," said consumer advocate Harvey Rosenfield, President of the Foundation for Taxpayer and Consumer Rights. "The utilities wrote the deregulation law; now that they don't like how the so-called free market has turned out, they don't want to have to foot the bill. But the CPUC and the courts have made it clear that the utilities are not going to be able to make the ratepayers bail out the utilities. The utilities should make a decision in the context of current law whether to write off these power purchases. Instead of trying to influence Wall Street with this short-term strategy, they ought to accept the truth."

San Francisco-based TURN will issue a detailed report on Wednesday, which addresses the issue of whether or not the utilities have suffered any true losses as a result of electricity deregulation.
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