Edison International has eliminated its fourth quarter dividendand subsidiary Southern California Edison has dropped $100 millionin electric system operations and maintenance investments affecting400 jobs to help ease its financial crisis.

At the same time the Fitch ratings service has adopted a waitand see attitude regarding the investment grades of Edison andPacific Gas & Electric, currently caught in the power pricesqueeze in California.

“To preserve our ability to provide electric service and remainviable, we are taking these immediate cash-preserving actions,”said Edison International Chairman John E. Bryson. The company’sboard of directors voted Friday to eliminate the fourth-quartercommon stock dividend that customarily would have been paid on Jan.31, 2001. The company said decisions about future dividends wouldawait a decision by the California Public Utilities Commission(CPUC) and FERC to reform California’s dysfunctional wholesaleelectricity markets.

The decision to cut costs will affect needed investments ininfrastructure, load growth, and system automation, as well asreducing substantially work done during overtime hours. The companysaid it has developed a contingency plan to implement moresubstantial reductions if further action to remain solvent becomesnecessary. The plan will result in additional substantial workforce reductions and significantly reduce service to customers.

Last month Edison put a freeze on hiring and new construction,and a suspension of equipment purchases and service contracts.Also, Edison suspended charitable and community contributions,eliminated all discretionary travel, and reduced administrativeexpenses throughout the company.

Meanwhile Fitch, said Friday it would await a decision by theCalifornia Public Utilities Commission’s (CPUC) promised in earlyJanuary on raising consumer rates to start paying the power coststhat have resulted in $8 billion in debt on the utilities’ books(see Daily GPI, Dec. 22).

The outstanding issue is whether rate increases willsufficiently offset high wholesale power prices being paid by thecompanies. The ratings agency said the companies’ securitiesratings are likely to weaken, unless the utilities are allowed fullrecovery of power costs and price stability is ensured for theregional market.

The utilities have sufficient cash and existing credit tosupport them through the decision period of the first week inJanuary, Fitch said. If a suitable rate structure is passed by theCPUC at that time, the utilities’ banks would be more likely toconsider additional funding.

Liquidity will remain strained, however, to the extent thatregional power prices remain high. “Given the large costs incurredand numerous constituent groups affected, Fitch envisions alonger-term scenario of consecutive rate increases associated witha fundamental overhaul of California’s power market. In conjunctionwith the governor’s active involvement, the California legislatureis evaluating potential actions to restructure the state’s powersituation. Legislative action remains possible over the next threemonths, and could impact debt ratings.

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