Gov. Davis, SoCal reach $2.8 billion transmission deal

Signaling the possible end of California�s fling with deregulation, Gov. Gray Davis and Southern California Edison Co. (SCE) Friday agreed in principal to return to cost-based regulation of the utility�s power plants and for the state to buy the utility�s transmission system for $2.76 billion. Gov. Davis also said Edison International, parent of SCE, agreed to transfer $420 million back to the utility.


By the OGJ Online Staff

HOUSTON, Feb. 23�Signaling the possible end of California�s fling with deregulation, Gov. Gray Davis and Southern California Edison Co. (SCE) Friday agreed in principal to return to cost-based regulation of the utility�s power plants and for the state to buy the utility�s transmission system for $2.76 billion.

Gov. Davis also said Edison International, parent of SCE, agreed to transfer $420 million back to the utility. Edison International also agreed to commit the output of the proposed Sunrise Mission power plant owned by an unregulated affiliate to 10 years of cost-based rates for the benefit of ratepayers.

The governor has been promoting the idea of buying the transmission assets in order to stabilize the financially crippled utilities and provide some resolution to the energy crisis enveloping the state. But officials with the other utilities, Pacific Gas & Electric Co. and San Diego Gas & Electric Co., say no agreements have been reached with the state concerning a sale of their transmission systems.

PG&E Corp., parent of Pacific Gas and Electric Co., said in a statement Friday it will continue discussions with the governor to resolve �outstanding issues.�

The proposed state bailout includes permission for Edison International to float bonds to pay off $5.46 billion of debt from unpaid wholesale power purchases accumulated under the first few years of deregulation. Under California's restructuring law, the utility sold most of its generation and bought power on the spot market. But retail rates were frozen and the utility could not pass on the full amount of its purchased power costs. Under the governor's plan, ratepayers would pay off the bonds over a long period of time to avoid an immediate jolt to rates.

Executives with Southern California Edison did not confirm or deny the governor�s announcement.

�We are in active discussions with the state,� said Ted Craver, Edison�s chief financial officer. �We hope to have a final agreement soon.� But the governor released other details of the �agreement in principal� indicating that discussions were advanced.

Davis also said Edison agreed to drop litigation that sought an immediate and hefty increase to retail rates. Other conditions involved granting conservation easements on 20,000 acres of watershed lands for 99 years.

More in General Interest