California Gov. Gray Davis and leaders of the California Assembly late Tuesday approved the rough outlines of a deal aimed at keeping Southern California Edison out of bankruptcy, but the proposal has been blasted by state consumer groups as a bail-out.
Details on the deal were hard to come by Wednesday as staff for key Democratic lawmakers and Davis (D) huddled to hammer out specifics. A written proposal was supposed to be released late Wednesday.
But the deal appears somewhat less generous to SCE than a bill approved last month by the state Senate. It would require the utility, California’s second largest, to write off $1 billion of its staggering $3.5 billion debt. SCE would be allowed to issue $2.9 billion in bonds to pay off the remaining debt.
The utility would not be able to pass through its bond repayment costs to residential customers. Instead, only large commercial and industrial customers would be required to pick up that tab.
At press time, however, negotiations were still underway on where the size cutoff would be for industrial and commercial customers who would be required to pay off the bond debt, according to Davis spokesman Steve Maviglio. Some sources said that SCE would be able to collect bond repayment monies from all commercial and industrial customers with peak usage of 40 kilowatts and higher.
Maviglio also said that, contrary to some news reports published Wednesday, that the deal would place no restrictions on which creditors SCE would be allowed to pay off with the bond revenues.
The Senate bill limits charges to customers with peak usage of 500 kilowatts or more, which equates to about 3,500 commercial and industrial customers.
The utility owes about $1 billion to large generating companies. Davis has been outspoken in stating that some of these companies have gouged the state by charging excessive prices for power. For that reason, some lawmakers are opposed to making the state’s consumers pick up the tab for SCE’s debt held by the generators.
The new deal also would give California an option for five years to buy SCE’s transmission system at its book value of approximately $1.2 billion, far less than the $2.76 billion Davis had offered the utility in an earlier proposal.
An SCE spokesman said the utility would have no comment until it saw a written proposal, although company Chief Executive Officer John Bryson was quoted in Wednesday’s edition of the Los Angeles Times as expressing “cautious optimism” about the proposed deal. SCE had said previously that the Senate deal would not prevent the company from bankruptcy.
Consumer advocates remained bitterly proposed to the agreement.
“First of all, it’s too much money for Edison, and it’s a bail-out with no consideration for ratepayers,” said Nettie Hoge, executive director of the Utility Reform Network.
Harvey Rosenfield, president of the Foundation for Taxpayers and Consumer Rights, a state watchdog group, told The Energy Daily Wednesday that if this deal or any other SCE bail-out is approved by lawmakers, he would launch a ballot initiative in November 2002 to scuttle the deal and return the state to cost-based utility regulation.
Twelve years ago Rosenfield led a successful ballot initiative on insurance regulatory reform, and the industry spent $80 million in a failed bid to defeat the initiative. Rosenfield predicted that the fight over a electric reform initiative would be “the mother of all ballot initiatives.
“I have many, many other things I’d rather do than another ballot initiative, but we are just determined to take these guys on,” he said. “Our internal research-and I’m sure the industry’s polls show the same-that they would have a very difficult time beating this, even if they spent $100 million.”