Edison Selling $2.4 Billion Worth of Bonds

Southern California Edison Co. is selling $2.4 billion of bonds backed by a special charge on electricity bills, and investors are lining up to buy them.

Southern California Edison, a unit of Edison International, is the second California utility to offer these “rate-reduction” bonds. And like the $2.9 billion sold last week by Pacific Gas & Electric Co., investors are voicing concern that they won’t get as many bonds as they want.

“We liked the original deal and you couldn’t get much,” said Michael Hoeh, who manages $5 billion of asset-backed bonds at Dreyfus Corp. and plans to buy some of the new securities. “We hear that this sale is over 10 times oversubscribed.”

Investors favor the bonds because they offer higher yields than similar top-quality corporate bonds and other asset-backed securities--debt that consists of repackaged consumer debt such as credit card receivables and auto loans.

Since the bonds are backed by utility bills, they’re safer than bonds backed by consumer loans.

What’s more, as many states are in various stages of considering such sales, the market could grow to as much as $150 billion.

California is the first to sell the bonds, which are part of a plan to help the state’s utilities prepare for competition. They will use cash from the bond sales to pay for old investments and give consumers a 10% electric rate cut.

Southern California Edison is selling the bonds in seven parts, with maturities ranging from one year to 9.5 years. The largest part, $741 million of bonds due in 7.4 years, is expected to yield about 60 basis points more than Treasury notes with similar maturities.

The safety of the bonds is attracting investors who typically buy corporate debt.