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Industry News

Davis Tries to Rescue SoCal Ed 'Rescue' Plan

LCG, Sept. 5, 2001--With the California legislature set to call it a year in just nine days, Gov. Gray Davis was struggling to win sufficient support from lawmakers within his own Democrat Party to get legislative approval of a plan to "rescue" near-bankrupt Southern California Edison Co.

What Davis spokesman Steve Maviglio called a "full court press" may not be enough. Last week, state Senate President Pro Tem John Burton, a San Francisco Democrat, predicted that the bailout measure "will go down the toilet."

Sen. Debra Bowen, chairwoman of the state Senate Energy Utilities and Communications Committee and also a Democrat, said the version now being debated in the Assembly would have "great difficulty winning (my) support."

Evan Goldberg, Bowen's chief of staff, said "I think she has major concerns with the changes that have been made to the bill. It is significantly different from the bill which won her semi-reluctant support."

It is the never-ending changes to the rescue plan that make its eventual passage doubtful. In April, even as the state's largest utility Pacific Gas & Electric Co. placed itself under the protection of Chapter 11 of the U.S. bankruptcy law, Davis and SoCal Ed put together a deal that would have had the state purchase the company transmission assets for $2.76 billion, providing the utility with an infusion of cash that would have allowed it to pay off most of the $3.9 billion in debt incurred buying power on behalf of its customers at high wholesale prices and selling it a low, frozen rates.

At the time, Davis and SoCal Ed said that the plan was amenable to no changes whatsoever.

The legislature was having none of that, and by the time the state Senate passed its rescue plan the obligation by the state to buy the transmission system was replaced by a five-year option to purchase the wires for only $1.2 billion, their book value. The company would be allowed to issue $2.5 billion in revenue bonds and service that debt from a surcharge on the bills of its 3,700 largest customers -- those with a peak demand of 500 kilowatts or more.

And SoCal Ed was having none of that. Ted Craver, chief financial officer for Edison International Inc., the utility's parent holding company, complained that the measure placed a cloud on a significant asset at a bargain basement price and termed it "unworkable."

In order to make the legislation more palatable to SoCal Ed, the Assembly has doubled what the state would pay for the wires, to $2.4 billion, but that is still only a five-year option and is still short of Davis' April deal. The company would also be allowed to incur $2.9 billion in new debt to refinance its old debt and the cost of servicing that debt would be extended to customers with a peak load of 20 kilowatts or more -- broadening the base to about 118,000 customers out of a total of around 11 million.

Those are among the changes Bowen doesn't like, and the bill is still unworkable in SoCal Ed's estimation.

Goldberg said "The version (Bowen) voted for was a stretch to begin with. The measure has only gotten worse from a ratepayer's standpoint."

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