SoCal executive urges settlement with state
Southern California Edison Co. executives warned creditors on a conference call Friday 'time was short' to avoid a bankruptcy filing similar to the Chapter 11 filing earlier in the day by Pacific Gas & Electric Co. The utility said it was continuing to work with Gov. Gray Davis on a comprehensive financial solution that would avoid bankruptcy.
By Ann de Rouffignac
HOUSTON, Apr. 6--Southern California Edison Co. executives warned creditors on a conference call Friday "time was short" to avoid a bankruptcy filing similar to the Chapter 11 filing earlier in the day by Pacific Gas & Electric Co.
The utility said it was continuing to work with Gov. Gray Davis on a comprehensive financial solution that would avoid bankruptcy.
"We need to come up with a comprehensive settlement not in weeks, not in months, but in days," said Theodore Craver, chief financial officer for Southern California Edison's parent company. "Negotiations with the governor are in a critical stage. We are short of time for a comprehensive settlement to be put in place."
He also said that Pacific Gas & Electric's bankruptcy will have repercussions on the electricity supply.
"This could magnify the reliability crisis and could affect the power supply for summer," Craver said. "The system and service reliability is threatened."
Separately, the California grid operator Friday said it doesn't expect any significant change in the supply of electricity as the result of the Chapter 11 reorganization filing by Pacific Gas & Electric Co. The Renewable Energy Creditors' Committee Friday warned of potential power disruptions if they do not get their first payment as promised Apr. 16.
"A substantial number of these generators � accounting for 3,000 Mw � already have curtailed operation because of the utilities' nonpayment. It would be disastrous for the state if Pacific Gas & Electric's bankruptcy filing forced more of these generators off line," the committee said in a statement.
Craver also addressed a growing threat that some creditor committee might force the company into involuntary bankruptcy. The company has not paid for power purchases in months or paid creditors for notes that have matured.
The utility owes a staggering $4.5 billion in past due power bills. The utility calls this sum its "undercollections" or the difference between revenues collected in rates and the cost of wholesale power.
"The frustration among QFs [qualifying generating facilities under special contract] and generators is evident lately," Craver said. "Why should they standstill and not press involuntary bankruptcy. A solution now is much more complicated because of Pacific Gas & Electric's filing."
The bankruptcy also calls into question the idea of selling the transmission system to the state as a way out of the financial crunch. While Pacific Gas & Electric's bankruptcy doesn't prohibit the state from going forward with such a plan, it will delay and complicate it, Craver said.
"The strongest and preferable route would be a global solution with all utilities involved," he said.
He agreed with creditors on the conference call legislators have apparently cooled to the idea of the state buying the transmission system. The state legislature would still have to approve any such settlement.
Craver said a settlement would instead first focus on getting the undercollections of past due power bills paid. A 'dedicated rate component' would be used to finance bonds which would pay off the undercollections problem. The transmission sale, while not completely out of the picture, is now regarded as a second part of a comprehensive settlement, he said.
One of the keys to Southern California Edison staying out of the bankruptcy court is for the California Department of Water Resources (DWR) to pay for the utility's entire "net short," Craver said. That was the intent of the bill AB1X, he said. The net short is the amount of power that the utility needs to purchase to serve customer load over and above what the utility can self generate and what it gets from firm contracts.