California’s second largest private-sector utility, Southern California Edison Co., on Friday obtained $1.8 billion in secured financing and along with cash on hand that had been steadily increasing since the mid-part of last year paid off all of the past-due part of its outstanding $5.5 billion to its creditors. The utility detailed the transaction in an 8-K filing with the Securities and Exchange Commission.

The $1.8 billion of new financing includes $1.6 billion in senior secured credit facilities and the sale of approximately $200 million of pollution control bonds that the Edison utility repurchased in late 2000. Both the credit facilities and the pollution bonds are secured by the utility’s first mortgage bonds, the company said in a prepared statement. J.P. Morgan Chase, Citibank and other banks closed the financing.

In its 8-K SEC filing, Edison’s utility reported total payments of $4.8 billion to repay previous credit facilities and to clear defaults and major power purchase obligations, including amounts to the now bankrupt and defunct California Power Exchange ($875 million), the state electric transmission grid operator, Cal-ISO ($99 million), and the small qualifying facility (QF) power producers in the state ($1.1 billion). The $4.8 billion represent all obligations past-due or in arrears, said an Edison utility spokesperson, with the difference ($5.5 billion minus $4.8 billion) being due in the near future and to be paid off in the coming weeks.

While expressing appreciation to all of Edison’s creditors for their “patience during this extraordinarily difficult period,” Jim Scilacci, Edison CFO, said the company was able to secure the bridge financing in large part because of the federal court settlement between Edison and the California Public Utilities Commission last October. That settlement, which has assured the utility of future cost recovery in its retail rates, is being challenged by the statewide utility watchdog group, The Utility Reform Network (TURN).

TURN’s spokesperson Mindy Spatt said Edison is not paying off its creditors — “the consumers are.” She said TURN will provide an oral argument to the federal 9th Circuit Court of Appeals in Pasadena, CA, Monday, arguing the the CPUC-Edison settlement allegedly cost consumers $3.3 billion and was the “product of closed-door negotiations” from which TURN was excluded, despite being a legal intervener in the case.

“We will challenge the district court’s authority to approve the scheme, the secrecy surrounding it, and the terms of the settlement, which violates state law,” Spatt said.

Edison noted that the paying off of creditors is only an initial step on the road to the utility regaining its investment grade credit rating and being able to regain its role buying wholesale electricity supplies from the state Department of Water Resources (DWR).

“Much more work remains to be done to fully accomplish our goal, but today’s successful borrowing means we are moving forward to restore (SoCal Edison’s) financial stability,” said Al Fohrer, CEO of the Edison utility.

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