Speculation Rises on SoCal Edison Involuntary Bankruptcy

With the failure of the state to agree on a rescue plan to restore Southern California Edison's financial viability, rumors last week grew louder that three of the major generators who are creditors would take the utility into involuntary bankruptcy.

Edison's parent company CFO, Ted Craver, senior vice president with Edison International, told a conference call with debtholders last Tuesday that the utility would strongly resist any attempt to force it into bankruptcy prematurely. However, Edison officials agree the utility is more likely to be taken into bankruptcy involuntarily now that the legislature has adjourned. But they also note the utility's financial position has improved, which may help hold off an effort by creditors to take the utility into bankruptcy.

"We don't think our creditors are losing any significant time by continuing to forbear," said Craver. "Southern California Edison's financial position is not deteriorating any further this time, and in fact, our cash position has stabilized, so we hope creditors will bear with us and continue to work with us despite what is a frustrating process." Edison continues to advocate a political solution because it will be quicker and less costly. In the final days of the legislative session last Friday, Edison was promised but never received a draft piece of legislation from the senate.

Jan Smutny-Jones, executive director of the California Independent Energy Producers (IEP), which includes many Edison creditors, said in a conference call that if his generator-members had wanted to push the utility into bankruptcy, "they would have done so by now." However, he wouldn't say categorically that none of IEP's members would join a push for bankruptcy.

"I don't know ultimately what any of the 50-odd companies that are part of our association may do; I can't guarantee (that they won't). I think, however, it is incumbent on Edison to reach out and explain how the back debts are going to be paid and how there could be some accommodations made."

He said that more dialogue between Edison and the generators is needed at the highest levels, otherwise, "people will assume the worst and take whatever actions are necessary to protect their own fiduciary responsibilities to their own shareholders."

Reuters News Service carried an item indicating that Reliant Energy and Mirant were looking for a third creditor (the minimum needed) to initiate the involuntary bankruptcy move. A Houston-based Reliant spokesperson, Richard Wheatley, said his company would not comment on the matter.

Another energy observer in California said a Mirant source was claiming that a third generator, Dynegy, was joining the pair to put together a contingency bankruptcy filing for Edison in the event that a political/regulatory solution in California does not develop.

Edison's spokesperson said the company was deciding how, and if, it will respond to the latest speculation.

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