The California Senate narrowly approved a scaled-down government bailout of Southern California Edison on Friday despite claims by the near-bankrupt utility that the deal would not solve its financial problems.
However, neither the Senate plan nor another Edison rescue bill in the Assembly had sufficient support to pass both houses of the Legislature. As a result, legislative leaders concluded that they would not be able to approve a rescue package before their monthlong summer break and would have to spend their vacation trying to broker a compromise.
"We need to continue to work on the Edison issue," said Assembly Speaker Bob Hertzberg (D-Sherman Oaks). "I don't want to walk away from this."
A spokesman for Hertzberg said late Friday that the speaker would convene a working group next week to negotiate a compromise.
Gov. Gray Davis, who reached a much-criticized deal with Edison in April to save the utility, said he was encouraged that lawmakers were moving to act on alternative versions of his plan. But he made clear that the Senate proposal needed work to gain his support.
"This is an important first step, but the bill still needs improvement," Davis said in a statement. "Nonetheless, I am pleased that Senate Democrats acted courageously."
After a lengthy debate that touched on so-called corporate welfare and the responsibility of legislators to sometimes make unpopular decisions, the Senate bill by Sens. Richard Polanco (D-Los Angeles) and Byron Sher (D-Stanford) cleared the upper house on a 22-17 vote, just one more than it needed.
Some lawmakers argued that the state should not even consider bailing out Edison because the utility had transferred billions of dollars to its parent company, Edison International, and other subsidiaries in recent years.
"The idea of Edison as victims--it goes down in the annals of real whoppers," said Sen. Ross Johnson (R-Irvine), likening Edison's cries for help to the pleas of the robber barons who sought the Legislature's help during the 19th century.
But others argued that as long as Edison remains in financial turmoil, the state will be too, because it will have to continue making massive purchases of electricity to avoid blackouts.
"We are not bailing out Edison," said Sen. Kevin Murray (D-Culver City). "We're bailing ourselves out."
The measure, SB 78xx, would allow Edison to float $2.5 billion in bonds to pay off much of the debt it accumulated last year and early this year buying electricity on the wholesale market. Because of that debt, Edison became insolvent and could no longer secure credit to purchase electricity, which forced the state in January to enter the power-buying business.
The bonds would be paid off by the utility's customers, who until recently had not felt the high power costs that led to Edison's debt because of a state-imposed rate freeze. Larger industrial consumers, not homeowners, would bear the brunt of the bailout.
Edison would be permitted to use the money to pay $1.3 billion it owes to alternative energy producers and $1.2 billion it owes lenders.
However, the utility would still be short the $1 billion it owes energy companies--debt many lawmakers claim was the result of blatant price gouging by power generators--and would still have to resolve that dispute. Because the deal does not cover all of Edison's debts, utility representatives told lawmakers they could not support it because it would not restore them to credit-worthy status.
Nonetheless, it was clearly the most generous effort Senate lawmakers were willing to make.
"Perhaps we have to admit we can't fix this," said Sen. Martha Escutia (D-Whittier), one of four Democrats who broke party ranks to vote against the Edison rescue.
Times staff writer Eric Bailey contributed to this story.