While other aspects of California’s year-old energy woes have settled into well-defined trench warfare that centers on supply, demand and price issues in Sacramento and Washington, D.C., the state’s two largest investor-owned utilities limp along, pulled by the ebb and flow of politics and the courts with no clear path for restoring their financial independence, although Gov. Gray Davis wants the state to exit its current electricity buying role by the end of next year.

With the governor’s now two-month-old memorandum of understanding (MOU) for restoring Southern California Edison Co. now firmly beached on some rocky political shores, various legislative proposals have emerged in recent weeks from diverse parts of the state legislature, ranging from an offhand suggestion by the state Senate leader that the state buy all of Edison — not just it transmission — to proposals for giving Edison retail rate coverage to pay off its billions of dollars in past-due power bills in exchange for various concessions not including a sale of its transmission facilities.

Edison officials will be watching closely the California Public Utilities Commission meeting Thursday because if the regulators fail to act, the utility has the option to walk away from the MOU. A CPUC spokesperson said Monday that the CPUC had no plans to add Edison items to Thursday’s agenda.

“The Commission is working diligently and expeditiously to complete the many decisions that need to be made pursuant to the MOU,” said Gary Cohen, CPUC chief counsel. “The parties always recognized that the June 8 date was optimistic; there are also numerous other things that have not yet happened that need to happen in order for the MOU to be consummated. The CPUC is not holding anything up. There simply is a lot of work to do.”

Meanwhile, Pacific Gas and Electric Co. continues to struggle in bankruptcy court having been turned down cold last Friday in trying to get out from under a CPUC order that it reallocate past collections of its stranded costs to help reduce the amount of its uncollected power costs. It was the second time that federal bankruptcy judge Dennis Montali refused to have the court usurp the CPUC’s ratemaking powers.

CPUC President Loretta Lynch said the regulators were “pleased, but not surprised,” that the judge ruled that the utility “cannot evade proper state regulation by choosing to file for bankruptcy and seeking protection from the bankruptcy courts.”

The PG&E utility said it was “disappointed” that the court did not agree that the CPUC’s action is “unlawful and retroactive,” indicating it will continue to pursue all of its possible legal challenges to the CPUC action.

Southern California Edison, on the other hand, seems more likely to be involuntarily forced into bankruptcy with the stalemate in getting CPUC and legislative support for the governor’s MOU and in defaulting on another $200 million in debt that came due June 1. (It will continue to pay interest on the notes.)

“The CPUC June 7 agenda is disturbingly void of any items related to the agreement implementation and one of the key items was the 60-day window for CPUC decisions,” said Ted Craver, Edison International’s CFO, who also noted that the items could get on the regulators’ agenda on Thursday. In reaction to questions, he said there was no indication a bankruptcy filing by the utility would immediately follow any final breakdown in regulatory and legislative activity on the MOU.

“Exactly what comes out of the legislative process is fluid, but any of the proposals have as their core the objective of restoring the utility’s creditworthiness,” Craver said.

Edison officials said they were not surprised by the legislative delays and the various proposals, but they were surprised that the CPUC has not moved ahead, at least on some issues they characterize as relatively “easy.”

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