Davis Upbeat on $2.9-Billion Edison Plan

Gov. Gray Davis expressed optimism Friday that a $2.9-billion plan to try to restore Southern California Edison to financial health will reach his desk before next Friday, when legislators adjourn for the year.

A day after the state Assembly narrowly approved the measure, the Democratic governor said that although it still needs to be reconciled with a slightly different version approved earlier by the Senate, he is confident the bill will clear the Legislature.

“I’m hopeful that we get the [rescue plan] ratified by a week from today, the last day of the session,” Davis said Friday during a breakfast meeting in Sacramento. “I think that’s entirely doable now, since it’s passed both houses, albeit in different forms. Our goal will be to get that done before the Legislature recesses.”

Davis’ optimism contrasted with angry words from consumer activists, who oppose the bill as a bailout of Edison.

“Is this the best deal the Assembly can get from a company that claims to be desperately in need of help?” said Mike Florio, senior attorney for the Utility Reform Network in San Francisco. “It reads as if the same scoundrels that led the Legislature into deregulation--the utilities and the large commercial customers--are still running the show.”

Edison executives offered a subdued response during a conference call with investors Friday, maintaining that the road to restoring the company’s finances in the Capitol remains long.

“This is another step in the trail,” said Theodore Craver Jr., chief financial officer of Edison International, parent company of the Rosemead-based utility. “We obviously have a long way to go yet in terms of additional steps at the Senate, but it’s good to see some momentum there.”

The bill, SB 78xx, by Sen. Richard Polanco (D-Los Angeles), is a slimmed-down version of a rescue deal Davis reached with the debt-strapped utility this spring to keep it out of bankruptcy.

It has cleared both houses, but still needs final approval in the Senate, where Senate President Pro Tem John Burton (D-San Francisco) plans to take several days to review the changes made in the Assembly to determine whether the measure is viable.

In many ways, the two versions are alike. Both would allow the utility to float bonds that would be used to repay about three-fourths of the $3.9-billion debt Edison incurred purchasing electricity during the early days of the energy crisis. Edison bought the power on the volatile open market for far more than it could charge its customers under a state-imposed rate freeze.

Edison would be permitted to use the money to pay back most of its creditors--banks and small alternative energy producers. Both bills would bar Edison from using the money to repay large energy companies, which Democratic legislators accuse of gouging the state during the crisis. The utility would be on its own to pay or negotiate the $1 billion it owes those companies.

Under the Assembly version, the bonds would be paid off by about 180,000 of Edison’s large- and mid-sized business customers, those that use 20 kilowatts and up. Under the Senate version, a smaller number of the largest businesses would foot the tab. Under both bills, residential customers and most small businesses would be spared.

Supporters of the bill say that neither version would require an additional increase in electricity bills. Opponents question that assertion.

Because the company would still have sizable debts even if the bill passes, Edison representatives say they cannot guarantee they will not wind up in bankruptcy. Robert Foster, Edison International’s executive vice president of external affairs, told investors Friday that the bill “still leaves Southern California Edison at risk.”

“Nevertheless, we are encouraged by the progress made by the Assembly toward creating a workable framework to get the state out of the power procurement business and restore Southern California Edison to credit-worthiness,” Foster said.

In both plans, Edison would also agree not to pursue a series of lawsuits and legal claims against the state. Pacific Gas & Electric, the state’s largest utility, has filed suit against the state, charging that the rate freeze illegally prohibited the company from recovering its costs of providing power to customers.

Both bills also would give the state conservation rights to 20,000 acres of mostly wilderness land near Edison’s hydroelectric power reservoirs.

The original rescue deal from last spring hinged on the state purchasing Edison’s power grid. Some legislators and consumer activists said the grid could be upgraded with public financing to improve the distribution of power and prevent the likelihood of blackouts. But legislators have questioned the value of owning a third of the state’s power lines--the share controlled by Edison--and the bills minimize the grid acquisition.

Under the Senate plan, the state would have an option to purchase the lines at $1.2 billion or book value, less than half what Davis initially proposed. The Assembly plan would give the state a similar option, requiring further action by the Legislature before it could be exercised. The Assembly bill would pay the utility twice book value or fair market price, whichever was lower.

The Assembly and Senate versions contain provisions that would allow businesses to pursue “direct access” contracts to buy electricity from energy companies instead of from the utility. Participating businesses would have to pay an exit fee of sorts to cover their share of the utility’s debt bonds.