PUC May Trip Bailout of Edison

In a development analysts fear could push Southern California Edison closer to bankruptcy, the Public Utilities Commission is expected to miss a deadline to complete a set of regulatory changes required in a bailout plan with Gov. Gray Davis.

Under the rescue agreement worked out between the utility and the governor, the PUC was required to implement six regulatory changes--mostly dealing with rate making, nuclear power sales and energy procurement--by June 8.

But in a conference call with creditors Friday, worried Edison officials noted that none of the changes are on the agenda for the next PUC meeting Thursday.

The PUC agenda represents a “disturbing void” that could endanger the entire agreement, said Theodore Craver Jr., chief financial officer of the utility’s parent, Rosemead-based Edison International.

Analysts said the lack of PUC action probably signals that the Davis plan, which has little legislative support, also may be in trouble with the state’s chief regulatory agency.

Gary Cohen, PUC general counsel, said the commission’s staff is working on the regulatory changes, but that “everybody knew that June 8 deadline was optimistic.”

“We are not trying to kill the deal. It’s just that there is a huge amount of work to be done,” he said.

But some legislators are pressuring the PUC not to move ahead.

“I am asking them not to do anything until the Legislature acts,” said Senate leader John Burton (D-San Francisco). “Why give regulatory relief to Edison until we know what the people of California are going to get in return?”

In objecting to the PUC taking action, Burton is bucking Davis, who still supports the agreement he reached with Edison.

“We would like to see the PUC consider the items as quickly as they can,” said Steve Maviglio, a spokesman for the governor.

Craver said that without PUC action by the deadline, Edison would feel free to walk away from the agreement, though it is not clear what other options the utility has. Various state lawmakers are exploring rescue plans ranging from the state purchasing the company to having ratepayers pay for the rescue. None of the plans appear to have a consensus.

One option would be for Edison “to stick with the program as long as we were seeing some hard evidence as to what the PUC was doing and what would be on their next agenda,” said Stephen E. Pickett, vice president and general counsel at the utility.

Creditors listening to the conference call clearly were disturbed by the turn of events and immediately peppered Edison executives with questions about whether this development would push the utility closer to bankruptcy.

“We are not really in a position to speculate on that at this time,” Craver said. “We will have to see what takes place,” he added.

Nellwyn Voorhies, a San Diego lawyer who represents Edison bondholders, said she had not seen the PUC agenda, but held out hope that there still would be a way for the rescue plan to move forward. Still, she said she was concerned by Friday’s news, as well as the $9-million lien the city of Long Beach recently won to attach Edison assets.

“Anything that leads us to believe that the memorandum of understanding won’t be implemented is an incremental step that makes it more likely that someone will file for bankruptcy, either the debtor or a creditor,” Voorhies said.

Voorhies said the legal move by Long Beach was worrisome because it could keep the $9 million in assets away from other Edison creditors. As a result, she said, the attachment raises the likelihood of a creditor making an involuntary bankruptcy filing.

With a bankruptcy filing, the $9 million in assets “could be distributed to all creditors, rather than just the one who attached them,” she said.

Edison officials have maintained that they would do everything possible to avoid following the footsteps of the Northern California utility Pacific Gas & Electric, which filed for bankruptcy court protection in April.

Both companies have come to the brink of financial ruin from soaring power costs and regulatory limits on the expenses they could pass on to customers.

Though PG&E; chose to file for bankruptcy protection, Edison reached a “memorandum of understanding” with the governor that could bail out the utility. It calls for Edison to sell its transmission lines to the state for $2.8 billion. The utility also would be able to issue ratepayer-secured bonds to pay off $3.5 billion of debt piled up from purchasing electricity at prices above what regulators would allow Edison to charge its customers.

Power generators owed money by Edison generally have been patient, hoping the state could work out a rescue allowing them to recoup most or all of their money, said Brian Youngberg, an analyst at Edward Jones in St. Louis.

“Now, creditors will have to take a harder look at whether they should force Edison into Bankruptcy Court or wait and see if something still can happen,” Youngberg said.

In the conference call, Craver intimated that Edison officials were concerned about an involuntary bankruptcy filing.

“If somebody files a petition, we are starting down a very slippery slope,” Craver said.

Craver and other executives said there was still a chance that the PUC would take up the regulatory actions required by the agreement.

Also, Southern California Edison defaulted Friday on the principal payments on $200 million in debt, bringing the total default on notes and other debt this year to $931 million. The utility plans to continue to make interest payments.

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Times staff writer Walter Hamilton contributed to this report.