The Associated Press

A federal judge on Friday will consider a settlement designed to keep Southern California Edison out of bankruptcy.

Lawyers for the state’s second largest utility and the state Public Utilities Commission filed the papers Thursday, urging U.S. District Judge Ronald S.W. Lew to allow the deal to stand.

If approved, the agreement would allow Edison to pay off an estimated $3.3 billion of its more than $6 billion debt by forcing its customers to continue paying higher rates imposed last May for at least two more years. It also would require Edison‘s shareholders to forego $1.2 billion worth of dividends over three years.

The deal was secretly negotiated over 10 days and made public on Tuesday. It would settle a lawsuit filed by Edison last November and is designed to keep the Rosemead-based utility from following Pacific Gas and Electric, the state’s largest utility, into bankruptcy.

In separate filings to Lew, both parties responded to criticisms of the settlement filed Wednesday by The Utilities Reform Network, a San Francisco-based consumer advocacy group, and the Los Angeles Office of the County Counsel, which were both allowed to intervene in the case.

Shareholder-owned utilities in the state began incurring debt last year because they were unable to pass along skyrocketing wholesale power costs to ratepayers. The state’s 1996 deregulation law imposed a price cap on energy rates paid by customers, which was the focal point of Edison‘s lawsuit against the PUC.

Lawyers for TURN and Los Angeles County, which is one of Edison‘s largest customers, complained in their Wednesday filings that Lew had given them only 24 hours to offer comments on the proposed settlement.

TURN, in its filing, also said the PUC had violated state law by secretly deciding regulatory issues without public hearings.

The PUC, in its reply, said it was “sensitive” to the objection, but noted that state law allowed the agency to consider litigation in closed session.

Reliant Energy Services and Mirant Corporation, which are owed more than $260 million by Edison for power purchases, have also filed a joint objection to the proposed settlement, claiming the agreement does not spell out exactly how they will get paid.

The proposed settlement also was receiving mixed reviews outside of court filings.

“If this is agreed to, the power crisis has just entered another phase,” said Douglas Heller, a consumer advocate for the Santa Monica-based Foundation for Taxpayer and Consumer Rights. “This is the pay-now-ask-no-questions-later phase of the power crisis in which the government is effectively giving up its rights to challenge Edison‘s unrelenting demands for more money.”