Push to come up with alternative to bankruptcy before recess
The San Francisco Chronicle
Lawmakers are struggling this week to agree on a plan to keep Southern California Edison from declaring bankruptcy as they rush to complete business before Friday’s scheduled summer recess.
After months of talking about a solution and dismissing one agreed to by Edison and Gov. Gray Davis, lawmakers now have several competing proposals to consider.
A plan introduced last week by Assembly Speaker Robert Hertzberg, D-Sherman Oaks (Los Angeles County), was debated for several hours yesterday, along with a GOP-backed alternative by Assemblyman Roderick Wright, D-Los Angeles.
The two plans, which are scheduled for votes today in the Assembly Energy Costs and Availability Committee, take sharply different approaches:
- Hertzberg’s plan would pay $2.4 billion for Edison‘s transmission lines to help cover the utility’s estimated $3.5 billion debt. The utility would be allowed to pay off its remaining debt by issuing bonds.
The utility would repay the bonds using ratepayer money. For the first two years, all customers would pay for the debt, but after that the largest users would pay off the rest.
- Wright calls his plan a “straight bailout.” It would allow the utility to issue bonds to cover all of its debt and impose a $2 a month rate increase for all users until the debt is paid.
The Senate also introduced its own plan. A bill by Sen. Byron Sher, D-Palo Alto, would give the state a five-year option to buy the transmission lines and would have the state back only $2.5 billion of the utility’s debt.
Since Davis announced a deal with Edison earlier this year, lawmakers, business groups and consumer advocates have all expressed reservations with one aspect or another of it. Opposition has usually focused on the state purchase of Edison‘s transmission lines.
The flurry of activity this week is an effort by lawmakers to take some kind of vote before they adjourn. The Edison agreement has an Aug. 15 deadline for approval by the Legislature.
Brian Bennett, a spokesman for Edison, said creditors view that date as extremely important.
“We’re as close to bankruptcy as our creditors want us to be,” he said. “Is it a drop dead date? I don’t know, but it is clearly an important date.”
Consumer groups have denounced Wright’s plan, and at least one calls Hertzberg’s proposal just another bailout and said it would cost Californians $ 6.7 billion over the next 10 years.
“We cannot be seduced by big businesses paying a bailout tax,” said Doug Heller, a consumer advocate with the Foundation for Taxpayer and Consumer Rights. “At the end of the day, we know businesses will pass these costs on to the consumer.”
Included in the 76-page Hertzberg bill are provisions that would allow large companies to buy their power directly from a provider instead of going through the utility after 2003.
But a coalition of large business groups also said they are strongly opposed to the plan because it does not allow for immediate direct access.
“Ultimately, we think our companies buying power for themselves is the best solution,” said Jack Stewart, president of the California Manufacturers and Technology Association. “If businesses think there’s a light at the end of the tunnel where they see lower rates coming, they might tough it out and stay.”
Wright argues that the beauty of his proposal is that it could easily apply to the Pacific Gas and Electric Co. service area if the company wanted to use it as a way out of bankruptcy court. He estimates that PG&E customers would pay about $4 a month to help the company pay off its debt.
“This is a straight bailout,” Wright said. “This is not a hidden bill. There are extras.”
Wright said he believes his constituents would rather pay an extra $2 than be unemployed because their business left the state due to high energy costs.
Business groups said the idea makes sense.
“What good would it do to have your electricity bill reduced by $10 or $15 but not have a job?” said Bill Hauck, president of the California Business Roundtable.
Whatever plan is eventually authorized would be used to convince the PG&E bankruptcy judge to follow a similar model for that company, giving the state those transmission lines as well.
The purchase of the transmission lines has been at the center of Davis’ plan. He argues that the purchase will give the state the ability to upgrade the system, allowing a better flow of power between Northern and Southern California and a decreased chance of blackouts.
But opponents argue that the state is getting one-third of a complicated system that will cost billions to upgrade and operate.
“It’s like buying a car with three wheels–it is not going to get out of
the lot,” consumer advocate Heller said.