Edison Tentatively Supports Latest CA Legislative Proposal

Although it wants more than book value for its transmission assets if the state buys them, Southern California Edison Co. said it tentatively supports the latest California legislative proposal to restore the utility's financial standing. Speaking at a state Assembly hearing, an Edison senior executive said that with some modification the proposal could restore the utility's creditworthiness.

Horse-trading and language changes continue to be made in the proposal (AB 82XX), which expands on another bill passed by the senate before the summer recess. The latter bill (SB 78XX) Edison declared dead-on-arrival because it claimed the measure would not prevent the utility from slipping into bankruptcy.

So far, the latest Assembly proposal would offer Edison close to $3 billion to cover what the utility estimates is $3.9 billion in debts it must pay off to restore its credit ratings so it could by the end of next year begin buying spot power supplies and perhaps assuming some of the long-term contracts signed by the state Department of Water Resources (DWR).

Unlike the memorandum of understanding (MOU) that Edison struck with Gov. Gray Davis last April, the Assembly proposal calls for a five-year option for the state to buy the Edison transmission system, but at no more than book value ($1.2 billion). The MOU had called for 2.3 times book, or $2.76 billion.

Politically, the higher price has been unacceptable because the lawmakers contend the voters see this as an extravagant "bailout" of one of the companies that engineered the state's ill-fated move to electric industry restructuring in 1996.

Edison Senior Vice President Bob Foster told legislators that if the transmission language can be changed, the utility most likely could live with the new legislation and avoid being dragged into bankruptcy involuntarily by its creditors.

From the utility's perspective, the biggest improvement in the rescue legislation (over the earlier passed senate bill) is the expansion of the numbers of business customers who would be eligible for direct access deals, and in return, would be asked to pay for the bulk of the cost of the nearly $3 billion bonds that Edison would sell tied to a portion of its retail revenue stream. (Most smaller residential and business customers would be exempt.)

In the senate bill, the utility's 3,600 largest customers are expected to foot the bill; in the latest proposal that number expands to 120,000 medium and large businesses.

Finally, Foster stressed that any legislation has to have assurances that Edison will be able to cover its wholesale cost of power in its retail rates, so what happened to the company last year and early in 2001 cannot be repeated in the future.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.