Get Edison Off Crutches
Gov. Gray Davis and the California Legislature have one more chance to keep Southern California Edison, the region’s largest utility, from going into bankruptcy. They have little time to act before the frenzy of the final days of the legislative session.
Does it matter whether Edison goes into bankruptcy? Pacific Gas & Electric Co., the larger Northern California utility, chose bankruptcy last April and the lights are still on. But it matters, absolutely, in counterbalancing the power generators whose greed largely got us into this mess, and in getting the state of California out of the business of buying billions of dollars worth of power.
If Edison were creditworthy again it could once again buy the electric power it distributes through much of Southern California. Los Angeles, a few smaller cities and the San Diego area have separate power systems. The state took over the purchase of power last January when both Edison and PG&E; ran out of cash as prices spiraled outrageously. The generators wouldn’t sell--and still won’t--to Edison because of its enormous debt to them.
With a settlement, Edison would be able to assume management of long-term contracts the state negotiated for the Edison service area. The state did cut some bad deals. Edison’s experts may be able to renegotiate them to the advantage of ratepayers and taxpayers.
The path through bankruptcy would be murkier. There still is no hint of how PG&E; will be required to pay its debts. One danger is that the courts could make the utilities sell their remaining generating plants to pay the bills.
A major cause of California’s soaring wholesale power rates and rolling blackouts this year was that deregulation transferred so much of the state’s power generation to private companies. Edison still produces about 40% of its own power. This is an important counterbalance against the private generators’ ability to manipulate the wholesale power market.
The Legislature and the governor’s office have struggled for months over how to pay Edison’s bills without it looking like a straight bailout or a bad deal for taxpayers. Now, Gov. Davis and Assembly Speaker Bob Hertzberg (D-Sherman Oaks) have proposed several reasonable amendments to a bill that the Senate has already passed.
The plan would allow Edison to float bonds to pay $2.9 billion of its total $3.9-billion debt, with Edison’s parent company taking on the rest. It protects homeowners (but not businesses) against further rate hikes and gets the state partly out of the power business. Lawsuits brought by the state and the utilities against the generators would not be hindered. This is a balanced plan that also could show a way for PG&E; to emerge from bankruptcy.
It is little cause for celebration when the state rescues a utility that embraced deregulation and helps pay off power generators that the governor called bandits--and worse--during the height of the power crisis. But the debt has to be dealt with, and getting Edison back on its feet is the smart path.
