Possible deal to keep the company afloat would not cover all of its debts. Passage is still iffy.
Los Angeles Times
The rough outlines of a possible deal to keep Southern California Edison out of bankruptcy began to emerge Tuesday as Gov. Gray Davis made a personal plea for lawmakers to approve a scaled-back bailout plan and company officials backed away from opposing it.
The plan, similar to one that already passed the state Senate, would cover most, but not all, of the utility’s $3.9-billion debt.
“We’re not doing this for Edison‘s sake. We’re doing this for our sake,” Davis said as he left the meeting with legislators. Restoring the utility to financial health is critical to ending the state’s energy crisis, he argued.
Earlier this month, Edison officials had said the Senate-passed bill would not keep the company solvent. On Tuesday, by contrast, they focused on suggestions for changes in the bill that would ensure they could obtain financing on Wall Street for their rescue efforts.
John Bryson, chief executive of parent company Edison International, expressed “cautious optimism” that the partial bailout would allow the Rosemead-based utility to regain financial footing, but he said it would not guarantee a recovery.
“We still have an enormous workout challenge ahead” if lawmakers only approve a reduced plan, he said in an interview.
But Assembly Speaker Bob Hertzberg (D-Sherman Oaks) said of the new proposal: “It’s the best that we can do.”
Details remained in flux. But the main points of the plan are that Edison would float $2.9 billion in bonds to pay off most of its $3.9-billion debt. The company would be allowed to pay off the bonds through existing charges for some business customers. How many businesses would face the charges remains a major point in negotiations.
Edison could use the money from the bond sale only to repay banks and small alternative power producers. The company would have to fend for itself with the remaining $1 billion it owes large energy generating firms.
Davis and many Democratic politicians contend the power companies overcharged California during the energy crisis. Many lawmakers are opposed to helping finance what they consider to be the result of price gouging.
Edison incurred the debts last year and early this year, when it was purchasing power for more than it could charge its customers under a state-imposed rate freeze. California is arguing before federal regulators that the power-generating companies should return billions in refunds.
As passed by the Senate, the bill would give the state an option for five years to buy Edison‘s share of the electricity transmission grid. That idea was once central to Davis’ bailout proposal but is now considered unlikely ever to happen.
The Senate plan called for only the largest of Edison‘s 3,500 industrial power users to pay the cost of the bonds. But company officials say they need a much larger pool–one-fifth of business customers, or about 118,000 in all–to pay the debt if they are going to persuade Wall Street to back the financing.
Assemblyman Fred Keeley (D-Boulder Creek) agreed that the number of businesses affected would need to be far greater than what the Senate proposed if it was to work. He would not reveal the exact number that the Assembly’s Democratic leadership will propose when it formally introduces a bill.
“The Senate’s version was fatally flawed,” Keeley said. “We are trying to genuinely solve the problem.”
Even if the bill passes the Assembly, which is still considered a major challenge, it will have to go back to the Senate, which has indicated through President Pro Tem John Burton (D-San Francisco) that tinkering with its proposed bailout could doom the effort.
Asked whether the new proposal could pass the Senate, Davis said, “We’ll have to take this a step at a time.’
As they weigh the merits of a bailout, lawmakers are closely considering the political fallout. Consumer advocate Harvey Rosenfield has promised a ballot initiative in November 2002 to unravel any rescue of Edison and to return the state’s electricity business to some form of regulation.
Rosenfield, president of the Foundation for Taxpayer & Consumer Rights in Santa Monica, predicted a last-minute sweetening of the Edison agreement’s terms during the Legislature’s usual end-of-session chaos.
“In the dead of night, they’ll cut some deal,” he said.
In other energy news Tuesday, Davis swore in his four appointees to the California Power Authority, a new state body created to help stabilize the state’s energy supply.
Led by Burton, lawmakers created the authority this year in response to the electricity crisis. It could become among the most significant of all state operations.
Davis described his vision of the agency’s role as “limited but important.” Among its duties, the authority can help private companies finance power plant construction and pay for building state-owned power plants. It also will oversee conservation efforts and promote alternative power production.
S. David Freeman, former chief of the Los Angeles Department of Water and Power, will serve as chairman, a $220,008-a-year post. Unpaid board members include John Stevens, a former senior advisor to Davis who works for Assemblyman Herb Wesson (D-Culver City); former Contra Costa County Supervisor Sunne McPeak, president of the Bay Area Council; and Donald Vial, chairman of the California Foundation on the Environment and the Economy. State Treasurer Phil Angelides will be the fifth member.
LOAD-DATE: August 22, 2001