A key Assembly committee voted Monday night to support acquiring a five-year option to purchase Southern California Edison‘s transmission lines at double their book value as part of a $2.9 billion state rescue plan.
The Assembly energy committee delayed a decision until today on the overall plan, but during a five-hour hearing it agreed to pay about $2.4 billion for the lines if the option is ever exercised.
Initially the state’s rescue plan called for an option to purchase the lines at net book value, about $1.2 billion.
Supporters claim that acquiring Edison‘s 12,580 miles of transmission lines — and those of other utilities — would provide the state with a valuable asset and more leverage over maintaining the lines and regulating the flow of electricity statewide.
But opponents have argued that acquiring transmission lines would commit the state to costly repairs and upgrades, and that private industry has more expertise at operating the lines.
The issue threatened to kill the entire Edison rescue plan, designed to help the state’s second-largest utility avoid bankruptcy and resume buying electricity for its 4.2 million customers.
Bob Foster, an Edison vice president, has told state officials that providing an option to purchase the utility’s transmission lines at book value could impair the utility’s borrowing capacity and ability to become creditworthy.
Energy committee members Monday night agreed to increase the value of the option in an attempt to resolve the impasse.
The move angered Doug Heller of the Foundation for Taxpayer and Consumer Rights, which has labeled the rescue plan a public bailout and vowed to lead a voters’ revolt.
“What just happened is that lawmakers just doubled the cost of the option without lessening the ($2.9 billion) burden to Edison‘s ratepayers,” Heller said.
If the rescue plan is approved by the committee, the pact will be sent to the full Assembly and then to the Senate for concurrence in amendments.
Supporters say that permitting Edison to join Pacific Gas and Electric Co. in bankruptcy proceedings could raise new questions about California’s energy future, send the wrong signal to businesses and make it harder for the state to extract itself from the energy-buying business.
But Harvey Rosenfield, leader of the Foundation for Taxpayer and Consumer Rights, said Monday that if the Legislature passes a rescue plan — regardless of its final form — “we will reverse that at the ballot box.”
Utilities helped create the current crisis by lobbying hard for deregulation and for the cap on electric rates that ultimately prevented them from recouping the full cost of electricity, Rosenfield said Monday.
Legislators have been arguing for months about whether to help Edison regain financial solvency and, if so, what should be given and what demanded in return.
Under the current plan, Edison‘s $2.9 billion bond sale would eliminate most of its $3.9 billion debt.
The remaining $1 billion owed to electricity generators would be Edison‘s responsibility, but the utility is expected to reduce that figure by using a $425 million tax refund from its parent company and any refunds it receives by contesting energy-supplier overcharges.
Approval of a rescue plan is not expected to raise rates above levels approved recently. However, businesses object to being singled out for repayment, partly because it could dim prospects for any future rate decrease.
Amendments accepted by the committee Monday night excluded about 1,500 acres of watershed lands near Shaver Lake from the pact.