Can't default on generator bills, Southern California Edison says

By the OGJ Online Staff

HOUSTON, Aug. 28 -- Fending off prodding by some debt holders, Southern California Edison Co. said all its creditors, including the independent generators, should be paid past due bills incurred by the utility.

Ted Craver, chief financial officer of Edison International, parent of Southern California, also conceded a California Public Utilities Commission proposal would shift $500 million in costs to Pacific Gas & Electric Co.'s customers from Edison, outraging PGE. "It's a shift to PGE customers. PUC said the rate burden will be less on our customers," Craver said.

Officials with the PUC disclosed the proposal during a Monday press conference, but the document is still not available. The PUC proposed reducing the amount of money allocated to the California Department of Water Resources for power purchases to $12.06 billion from $13.1 billion. The commission also reduced funding for conservation by $600 million, Craver said.

Southern California Edison owes the California Independent System Operator (ISO) and the California Power Exchange (PX) $900 million for power bought on the utility's behalf. That power was sold by generators to the ISO and PX that, in turn, dispatched the power to utility customers.

"Our view is all of the unpaid bills must be cleared," said Craver. "How can we be deemed creditworthy with unpaid bills?"

Craver said it is too soon to tell if any of the legislation being considered will return Southern California Edison to creditworthiness by appropriating enough money for the company to pay all its bills. California lawmakers are considering a rescue package first proposed by California Gov. Gray Davis.

Among the issues to be addressed is keeping electricity rates high enough to cover the utility's costs. "Legislative action must provide protection for going forward costs to assure that the utility will maintain creditworthiness," he said. "Rates have to cover costs or we will fall back into the same problem."

Southern California Edison and Pacific Gas & Electric ran up huge bills for wholesale electricity under a rate freeze that kept them from passing the costs along to ratepayers. The state stepped into to buy electricity on behalf of the utilities after suppliers refused to sell them more power without financial guarantees.

Craver said the company's total debt stands at $5.2 billion, including $2.4 billion of power procurement costs and $2.8 billion in unpaid bills and defaults.

He said the total must be paid from a dedicated portion of the rate structure that would be used to service bonds and from cash on hand. One bill under consideration in the senate would provide Edison with $2.9 billion in funds from bonds that would be serviced by a dedicated amount from retail rates. Craver also noted the company has $1.5 billion cash on hand.

Craver declined to comment further on pending legislation other than to say significant activity is under way.