In a move to stave off a possible involuntary bankruptcy attempt, Southern California Edison announced it has agreed to pay the City of Long Beach, the largest municipality in its service territory, $14 million for past-due bills related to power that the city sells to the utility from a municipal waste-fired generation plant.

Edison agreed to pay 10% now and the rest when it lines up a solution to all of its pending debts, estimated to be close to $4 billion. The utility stopped paying the city last November.

In a prepared statement last Tuesday, Edison said the agreement provides “further evidence of the benefits of pursuing negotiated, rather than litigated solutions,” and reiterated its urging that the state legislature reconvene next week to pass a rescue bill for the utility. “A bankruptcy, in contrast, would lead to years of delay and uncertainty,” Edison said in its statement.

Long Beach, which operates a municipal water and natural gas utility distribution service for its residents and buys power wholesale for all of its municipal facilities, has been openly flirting with options to a legislative solution to Edison’s financial woes.

First, it has expressed interest in joining a network of cities throughout Southern California to form a joint power authority (JPA) that would be part of a privately held street lighting firm’s long shot bid to buy Edison’s parent and the utility, sell off nonutility assets and a local power distribution utility as part of a JPA. The private firm, City Light & Power, Inc., currently has a contract to operate Long Beach’s lighting system.

The city also has been wooed by Reliant Energy and Mirant, two major Edison creditors, to become the key third creditor that under federal law could as a trio force the utility into involuntary bankruptcy, according to a report in Wednesday’s Los Angeles Times.

“We looked very closely at the bankruptcy item,” Long Beach’s city attorney said in the Times article.

In its prepared statement, Edison went out of its way to praise the city:

“We value our relationship with the city, the largest municipal customer we serve, and appreciate the patience of this and other creditors during this challenging time.”

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