Crucial debate begins over Edison’s financial future

Published on

Sacramento Bee

Divided legislators began grappling Tuesday with competing proposals to keep one of California’s largest private utilities, Southern California Edison, from going bankrupt.

Pressure is rising as Edison continues to struggle with more than $3.5 billion in debt and a tentative plan by Gov. Gray Davis to buy the utility’s transmission lines for $2.76 billion has attracted little support.

The question now is whether legislators will accept a modified version of the governor’s deal, an entirely different rescue plan, or will simply let Edison join Pacific Gas & Electric Co. in bankruptcy court.

“We’re encouraged that at least there’s activity and people are grappling with the issues,” said John Fielder, Edison senior vice president.

The Assembly’s energy committee heard testimony on two of the competing proposals Tuesday. The Senate’s energy committee will take up the third plan Wednesday.

The issue conceivably could be decided this week, since legislators are scheduled to begin their summer recess Friday.

Of the three proposals under consideration, one would authorize state purchase of Edison‘s transmission lines, one would provide an option to buy, and one would simply tally Edison‘s debts and charge ratepayers to pay them off.

Some legislators favor doing nothing at all and letting a bankruptcy judge decide Edison‘s fate.

Steve Maviglio, a spokesman for Davis, said the governor supports anything that “comes close” to the tentative deal, hammered out in April, to buy Edison‘s transmission lines.

Assemblyman Fred Keeley, D-Boulder Creek, and Assembly Speaker Robert Hertzberg, D-Sherman Oaks, have proposed a rescue plan that would buy the lines at a lower price – $2.4 billion – and would modify the governor’s plan substantially.

Key elements of the bill would allow the state to buy Edison‘s hydroelectric assets if the transmission-line sale falls through, allow businesses to contract with private suppliers for electricity in 2003, and commit the state to paying only 70 cents of every dollar owed by Edison to power generators.

The deal also would provide California with conservation easements to more than 20,000 acres of land, require Edison to increase its supply of alternative energy, such as wind or solar. The proposal is not expected to spark new rate hikes, Keeley said.

Unlike the governor’s proposal, the Senate plan relies on medium and large businesses to pay down Edison‘s debts. It dedicates up to $2.5 billion in large-user rates for debts involving banks and renewable energy sources known as “qualifying facilities.”

The plan, written by Sen. Byron Sher, D-Palo Alto, seeks to leave Edison with $1 billion in debt from generators and marketers for the utility to work out on its own.

The Senate plan would give the state a five-year option to buy Edison transmission lines for book value – about $1.2 billion.

Rather than provide conservation easements, the plan calls for Edison‘s environmentally sensitive acreage to be acquired by the state or a trust.

Remaining parts of the proposal are similar to the governor’s deal.

A third proposal, pushed by several lawmakers, seeks to eliminate debt for Edison and PG&E. It would not involve transmission lines, conservation easements or other such elements.

Advocates say Edison‘s debt stemmed largely from failed state regulatory policies, so the state should simply charge consumers a monthly fee to pay it off.

“This is a straight bailout, no hidden balls, no extras,” said Assemblyman Rod Wright, D-Los Angeles.

It is not yet known whether that fee could fit within the existing rate structure. For homeowners, the amount is estimated at $4 in the PG&E service area and $2 within Edison‘s boundaries.

Consumer groups are wary of the Edison rescue proposals, fearing the state will ultimately promise too much and get too little.

“When a supermarket and dairy farmer both are forced to pay a 10-year bailout tax, the consumer pays more for milk,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases