Lawmakers Can’t Duck This
The threatened bankruptcy of Southern California Edison is the bane of the state Legislature. Lawmakers fear voter backlash against a “bailout” of the investor-owned utility. They are reluctant to vote for a complex measure they don’t understand. What if it results in another mess like the 1996 deregulation plan? And some note that Pacific Gas & Electric Co. voluntarily slipped into bankruptcy without a flicker of a light bulb. Why not just let Edison do that, too?
To its credit, Edison does not want to go bankrupt, and lawmakers should not allow it. In the long run, a healthy utility is better for taxpayers.
Lawmakers and Gov. Gray Davis have the responsibility of crafting a workable compromise in the next several weeks, even though it may interrupt their summer recess.
Power rates have fallen in recent days, and Edison has been able to pay its current bills. Yet that does not alleviate the peril of bankruptcy because the firm still has no practical way to pay off the $3.9billion in debt incurred over the last year in buying wholesale electricity at hugely inflated prices.
When Edison and PG&E; ran out of cash in January, the private power-generating companies refused to sell them any more electricity. This forced the state of California into the power-buying business, where it will remain until the two utilities are solvent again.
The refinancing would make Edison credit-worthy again, perhaps as early as next spring, and allow it to take back from the state the job of buying the power it distributes to its 4.3million customers in Southern California, except in cities with their own utilities.
No one knows when PG&E; will emerge from bankruptcy, but it may be years. What if PG&E; is forced to sell off its remaining generating plants to satisfy creditors, perhaps dealing them to the very same generators accused of gouging the state for billions in power costs?
The necessary elements of an Edison deal are contained in competing Assembly and Senate measures. Both involve selling bonds to pay the firm’s debt but differ in amount and in the manner by which the bonds would be retired. The Assembly version properly envisions that generators would be repaid no more than 70 cents on each dollar, which is probably better than the firms could get from a bankruptcy court. The Senate bill in effect requires Edison to eat $1billion more in debt. The successful compromise will be a matter of sharing out the pain as fairly as possible.
Few Californians have any sympathy for Edison--or any utility--and the Legislature has no responsibility to give the firm everything it wants. However, the Legislature’s job is to protect the interests of the taxpayers, customers and the state as a whole. The only way to do that is to resolve the Edison crisis and not have it fall by default to a federal bankruptcy court. There, the power generators that bear so much blame for this mess would have too much say over its outcome.
