Optimistic Edison Says Turnaround Is Possible

Although it looks unlikely that the Legislature will agree on a financial rescue plan for Southern California Edison by an Aug. 15 deadline, officials at the troubled utility said Tuesday that they were content to let negotiations continue, in essence granting an informal extension to the agreement between the company and Gov. Gray Davis.

Speaking to creditors in a conference call, the executives also conceded that a financial turnaround for Southern California Edison looks possible within current electricity rates based on their assessment of Department of Water Resources energy price forecasts.

The utility’s preliminary review of the state’s projections, released Sunday, indicated that there is enough revenue to be derived from current rates to cover a $12.5-billion bond offering to pay for DWR’s power purchases this year and to cover an Edison bond offering to pay its $3.5 billion in energy debts.

“It does appear that things fit under existing rates,” said Theodore Craver Jr., chief financial officer of Edison International, the utility’s corporate parent.

Craver added that the utility has not completed its review.

But Pacific Gas & Electric Co., the Northern California utility that is in bankruptcy proceedings, was much less assured about DWR’s calculations and called for a public evidentiary hearing on the agency’s rate requirements and the cost it is incurring to purchase power.

“Given the tremendous importance of this issue--that is, the determination of how much our customers will be required to pay for electricity purchases by DWR now and in the future--this lack of information should be a cause of great concern for all parties,” the utility said in a statement.

The utility, a unit of PG&E; Corp., released a detailed, critical

response to the water department’s description of its revenue needs, saying the numbers don’t add up and are inconsistent. For example, the utility said, it appears that the water department will collect several cents more per kilowatt-hour from utility customers in 2002 than in 2001.

But Davis administration officials called that a false comparison, saying that overall collections in 2002 will be greater to compensate for the fact that the water department collected money from utility customers for only half of 2001.

“Perhaps if PG&E; had been more willing to cooperate they wouldn’t be so confused,” said Steve Maviglio, spokesman for Davis. “We’ve asked them repeatedly for numbers and information and they’ve been contentious as usual.”

The California Public Utilities Commission, which sets utility rates, on Tuesday also asked the water agency to provide more information on its rate requirements. The PUC scheduled a workshop for Friday in San Francisco at which DWR representatives will explain how they reached their revenue conclusions.

Edison said it would still would need some combination of legislative and regulatory approval to use a slice of the revenue from current rates to pay off its back debts.

Though both houses of the Legislature recessed this month without agreeing on a rescue plan for Edison, Craver said negotiations among representatives of Gov. Davis, the utility and lawmakers continue.

He said Edison remains committed to negotiating a solution outside Bankruptcy Court.

Last week, the state Senate passed a bill that would allow Edison to float $2.5 billion in bonds to pay off debt accumulated by buying electricity for more than it could charge customers. The bill limits the ways the company can spend cash raised in the offering, and is about $1 billion less than Edison was seeking. The Assembly adjourned without passing similar legislation but has worked on two rescue plans more generous to Edison.

None of the measures includes the proposed $2.8-billion purchase of Edison’s transmission grid that was envisioned in the utility’s original rescue agreement with Davis.

“This is still a work in progress, notwithstanding the legislative recess,” Craver said.

Edison once seemed likely to join Pacific Gas & Electric in U.S. Bankruptcy Court, but a reversal in energy prices has given the Rosemead-based company breathing room.

Falling natural gas prices have slashed the cost of Edison’s power purchases and generation in half since February. Also, the utility’s cash flow improved after it started collecting a record 3-cent-a-kilowatt-hour rate increase in June.

“Gas prices being down and the weather being relatively moderate and people conserving has settled the situation a bit,” said analyst Brian Youngberg of the Edward Jones investment firm in St. Louis. “But there are a lot of moving pieces, and this thing probably won’t be settled for years.”

Key to keeping Southern California Edison free of Bankruptcy Court is whether creditors--not Edison itself--believe that progress continues after the Aug. 15 deadline, Youngberg said.

Youngberg said he remains convinced that Edison would not voluntarily file for protection and would end up in bankruptcy only if forced there by unhappy creditors.

Though the utility’s initial review of the DWR projections are positive, Craver said he still has some questions about the DWR plan, which would take 1.65 cents from every kilowatt-hour sold to repay money the state spent when it jumped into the power business in January.

Edison shares fell 42 cents to close at $13.25 Tuesday on the New York Stock Exchange.

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Times staff writer Nancy Vogel in Sacramento contributed to this report.