Plan would have biggest customers pay Edison’s debt

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The San Francisco Chronicle

Legislative leaders are drafting a new rescue plan for Southern California Edison that would put the utility back on its feet financially at the expense of its biggest customers.

The plan would leave manufacturers, refineries and other big industrial customers with the burden of paying nearly all the utility’s $3.5 billion back debt through a dedicated charge. Residential and small commercial users would be on the hook for only a fraction of the back debt.

Big users say it is unfair to saddle them with all of Edison‘s debt, but supporters of the plan say it’s these users that wanted deregulation and should shoulder the costs it created.

“We’re trying to put something together in a way that solves all these problems, and if people are to be pigheaded about it, we won’t solve any problems,” said Assemblyman Fred Keeley, D-Boulder Creek (Santa Cruz County).

Although the plan is an alternative to Gov. Gray Davis‘ proposed deal to put Edison back on its feet financially, it could be used as a model to help restore Pacific Gas and Electric Co. to solvency.

Democrats say the plan contains some elements desired by Republicans, but GOP lawmakers object to saddling large business users with Edison‘s debt.

The plan is based on the way gas customers are divided into “core” and “noncore” users.


Under this proposal, electrical users would be divided the same way. Core users would be customers who use 500 kilowatts or less a month. Noncore would be those using more than 500 kilowatts.

Out of Edison‘s 4.2 million customers, only 3,600 would be noncore customers. But those 3,600 customers use about 26 percent of Edison‘s demand for energy.

Core customers would get their power from generators owned by Edison, long-term contracts and alternative energy producers, such as wind farms and solar panels, on contract with the utility.

That would mean those customers would no longer be subject to the whims of the spot market, which has far higher prices than other sources of electricity.

Large users, the noncore customers, would be given the right to negotiate to buy their power directly from generators or build on-site power plants to make themselves energy self-sufficient.

The plan would be phased in through January 2003 to give large energy customers time to prepare for buying power on the open market.

During that period, residential, small business and large industrial users would all share in paying off Edison‘s debt. But in 2003, that burden would shift exclusively to the big users.

Republican lawmakers and those same large users have been clamoring to be given what is called “direct access” to generators so they can negotiate cheaper rates.

Enron is also backing the idea of cutting loose the largest electricity users because that would create a built-in market for the energy the company sells.

Large users who want to remain on the grid could do so.


Sources said Edison officials met with lawmakers over the weekend to iron out details of the plan.

A spokesman for Edison said he was “encouraged” by the talks.

“I haven’t seen a finished product or a plan,” said Bob Foster, a senior vice president with Edison. “They’re approaching this in a spirit of goodwill and trying to find a solution.”

Big businesses complain that the plan does not work because right now, there is nowhere they can buy cheap electricity.

“We’re very concerned that separating the core from the noncore means we will experience extreme rate hikes over the next two years,” said D.J. Smith, a lobbyist for the California Large Energy Consumers Association.

“When you add blackouts, the multiple interruptions of production and another potentially huge rate hike, the result would be catastrophic to the economy,” Smith said.

Added Dorothy Rothrock, a lobbyist for the California Manufacturers and Technology Association: “What’s the rationale for the noncore to be paying the entire Edison undercollection? It sounds to me like just pure politics. They don’t want voters to pay because they vote.”


Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights, said he thought the plan would eventually turn into a bailout as business interests muscle lawmakers into pushing some portion of Edison‘s debt onto residential and smaller commercial customers.

“I think it’s a trick. We’ve seen this same tactic used at the Public Utilities Commission, where what were supposed to be rate increases for big business end up costing more for residential and small businesses,” Rosenfield said.

The new plan also does not include the outright purchase of Edison‘s part of the transmission system that loops electricity around the state.

Davis backs buying the lines for $2.7 billion. Democrats have insisted that for the state’s financial help, taxpayers receive something of value.

Republicans have insisted that they will back no proposal that includes state purchase of transmission lines.

In the new proposal, the state would have a five-year option to buy the transmission lines for $1.2 billion — the book value of the asset.

In addition, the utility would make $1.5 billion available to the state to either purchase other assets — such as Edison‘s hydroelectric facilities, for example — or use it in partnership to build new power plants.

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