The Bond Buyer
The California Senate today may consider an amended version of a bill, narrowly approved by the Assembly last week, that would keep Southern California Edison out of bankruptcy.
Senate Bill 78XX, sponsored by Richard Polanco, D-Los Angeles, would allow the debt-burdened utility to sell $2.9 billion in bonds to pay off banks and small energy generators, but leave the utility responsible for $1 billion owed to large power companies. The bonds would be secured through a charge paid by the utility’s large and medium-size business customers.
Labeled a bailout by opponents, including minority Republicans, the bill faces opposition in the Senate. Senate president John Burton, D-San Francisco, reportedly said the bill might again be amended, and any new amendments would have to be approved by the Assembly, all before the end of the legislative session this Friday. The Senate previously had passed a different version of the bill.
The Foundation for Taxpayer and Consumer Rights has promised to put the bill to a referendum. If the group succeeds, any action to implement the bill would be delayed until state voters go to the ballot, most likely in March.
Some opponents of the bill say a bankruptcy filing by Edison may not be such a terrible option. They note that Pacific Gas & Electric’s April bankruptcy filing has not resulted in any disruption to service. They also claim that allowing a bankruptcy court to deal with Edison‘s problem could reduce costs for ratepayers and the state.
Analysts have said that an Edison bankruptcy could further delay the state’s plans to issue $12.5 billion in power revenue bonds this fall. Those bonds would reimburse the state for the more than $6 billion it has spent to buy power this year after Edison and PG&E could no longer afford to do so. The utilities found themselves buried in debt after the cost of electricity skyrocketed in the state’s deregulated power market, and state law prevented them from raising rates high enough to compensate.
Under the bill, the state would have a five-year option to buy the utility’s power transmission lines for $2.4 billion, or twice their book value. The state would also have development rights on about 20,000 acres of Edison land.
Gov. Gray Davis originally proposed a rescue plan for Edison in April after the state’s largest utility, PG&E, sought protection from creditors in bankruptcy court. Both utilities have been downgraded to junk status. Davis and other supporters of the bill say it’s very important for Edison to regain creditworthiness so it can resume buying power for itself.
Edison said that even if the Assembly-approved bill becomes law, the utility could still face bankruptcy because of the $1 billion in debt that the bill would not cover.
Still, the company is “encouraged by the progress made by the Assembly,” and hopes the amended bill will receive careful attention from the Senate, it said in a statement Friday.