Better Than Bankruptcy
Southern California Edison will slip inexorably toward bankruptcy unless Gov. Gray Davis and the California Legislature stir themselves to action soon. Davis’ $2.76-billion plan to rescue the utility is dead in the Legislature, shunned as overly generous to both Edison and the private power generators. Possible alternatives are being discussed in legislative back rooms, but there is no visible sense of urgency about the fate of the utility, which provides electric power to 4.2 million customers.
Doing nothing is the worst option. The goal of both the governor and the Legislature should be to get the utilities back into the business of buying electric power as soon as possible.
True, Pacific Gas & Electric Co., supplier to the northern part of the state, went into bankruptcy two months ago and the sky didn’t fall. With that, the political will to restore Edison to fiscal solvency seems to have evaporated. Some argue that Edison’s problems might get worked out just as quickly in Bankruptcy Court, but history suggests that this option would take years longer than a political solution crafted by the Legislature.
The state is spending $50 million a day or more to buy power, at up to nearly $4,000 a megawatt-hour, more than 100 times the average price two years ago. This will go on until the utilities are again able to buy their own power, possibly in 2003, perhaps later. Each extra day increases the potential of fiscal calamity for state government.
A legislative solution stands a better chance of putting California back in charge of its own energy destiny. Lawmakers, smarting from the deregulation boondoggle of 1996, are wary of voting for a complex measure that is difficult for anyone but an expert to understand. But the elements of a fair and workable solution are available. They include:
* Dedication of a portion of existing rates to pay off the utility’s debts. Edison would sell power from its remaining plants in the state at a minimal profit for at least 10 years. Both Edison’s parent firm and the generators, to which it owes more than $3 billion, would have to absorb substantial parts of the utility’s debt.
* Maintain Public Utility Commission regulation of Edison, something that would have been dramatically eased under the Davis-Edison plan.
* Give the state a five-year option to buy Edison’s power transmission system--this rather than the Davis plan to pay $2.8 billion outright, which is far above book value. Lawmakers understandably want something tangible in return, but obtaining Edison’s part of the system does not get the state much if it doesn’t gain control of PG&E;’s share too.
Legislative leaders would like to present some alternative to the Davis plan. But with an election year approaching, many lawmakers are loath to open themselves to charges they bailed out a private utility company with a sweetheart deal. However, to sit idle would bleed away state funds, and in the end there would be nothing to show for it.
One late-blooming proposal for which there is little enthusiasm in the Legislature calls for the state to simply buy Edison lock, stock and barrel. Bad idea. California needs to work itself out of the power business, not further into it.
