Associated Press State & Local Wire
SACRAMENTO: As one of California’s major utilities settled its debts Friday, another remained mired in bankruptcy, which Gov. Gray Davis said is proof that Pacific Gas & Electric Co. should have chosen to work with the state to resolve its financial troubles.
Southern California Edison paid approximately $5.5 billion to creditors Friday, using $3.4 billion of cash on hand, plus about $400 million it collected from ratepayers in January and February. The remaining $1.6 billion came from loans.
Company executives said they were pleased with the progress Edison had made. “It is just one step along the long road, though, of getting back to financial health and serving our customers. But it is a very important step,” said Alan Fohrer, Edison‘s chairman and chief executive officer.
Edison‘s repayment meant hundreds of energy wholesalers, financial institutions, bondholders and other creditors received funds from the utility, which only five months ago was threatening to file bankruptcy if the state Legislature didn’t intervene.
Vince Signorotti, spokesman for geothermal company CalEnergy, said his company received “just a shade over $105 million” from Edison on Friday. “We’re very, very pleased that this chapter is over,” he said.
The payment was for power CalEnergy delivered to Edison between November 2000 and March 2001, when Edison and the state’s two other regulated utilities were facing sky-high wholesale power rates they couldn’t pass on to consumers.
Edison still isn’t creditworthy and the state will continue to purchase power for its customers, as it has since last January. The utility estimates it will not recover its undercollection – the difference between the cost of power and what it was able to charge ratepayers – until sometime next year.
But as Edison pays off its debts, PG&E officials should be “second-guessing” their decision to file for bankruptcy instead of working with the state, said Steve Maviglio, Davis’ spokesman.
PG&E spokesman Ron Low said the utility’s management did not regret their decision to seek bankruptcy protection.
“Under our plan of reorganization, the utility and each of the three new entities will be creditworthy companies,” he said.
A year ago, the utilities were facing the same problem – billions in debts due to high wholesale costs that surpassed a rate cap for consumers under the state’s 1996 deregulation law.
But PG&E, the larger utility, had more debt than Edison, Low said, and determined that bankruptcy court was a better venue for resolving its problems than the state Capitol. In its April bankruptcy filing, PG&E listed debts of about $13 billion.
The company expects to emerge from bankruptcy by the end of the year, but is battling state regulators over the reorganization plan. The utility wants to split off its power plants, natural gas and electricity distribution system into three new unregulated companies.
The PUC has countered with its own plan for the utility’s reorganization, which would keep the utility under state regulators’ oversight.
Davis, who is facing re-election in November, said Edison‘s repayment “proves that Southern California Edison was right to resist bankruptcy and my administration was right to fight so hard to restore the utilities to sound financial footing.”
In September, Davis failed to gain Legislative support for an Edison rescue plan. The Davis plan would have included the state purchasing Edison‘s transmission lines. In return, Edison would be allowed to issue revenue bonds to pay its debts.
When that tactic failed, Edison quietly negotiated a settlement of a lawsuit against the Public Utilities Commission that forces customers to continue paying higher rates imposed last May for at least two more years.
The Utility Reform Network, a San Francisco-based ratepayer advocacy group, has appealed the Edison settlement. That case will be heard Monday in the 9th Circuit Court of Appeals in Pasadena.
Harvey Rosenfield, executive director of the Foundation for Taxpayer and Consumers Rights, said Edison was repaying old debts by using money set aside to repay the state for energy purchases. The bill that authorized the state to get into the power-buying business said Edison and PG&E rates could be increased to cover the cost of the state’s energy purchases. Rosenfield said Edison is “using this money to pay off their past debts.”
Edison‘s loan wouldn’t be affected if TURN’s appeal prevailed, Fohrer said. “The bridge loan is a fully secured loan, secured by mortgagable property,” he said. “It’s a form of financing that gave (lenders) better comfort. The appeal, that’s going to play out over time. We believe that on the merits, we’ll prevail.”
—————–
On the Net:
Southern California Edison: http://www.sce.com
Pacific Gas and Electric Co.: http://www.pge.com
