Edison Agrees to Pay Its Debt to Long Beach

Southern California Edison, which lingers inches from the doors of U.S. Bankruptcy Court, reached agreement Tuesday to pay its more than $14-million debt to Long Beach.

The utility, which owes the city for electricity produced by a trash-fueled municipal power plant on Terminal Island, agreed to pay 10% now and the rest as the company arranges financing of its massive accumulated energy debts.

Edison stopped paying the city in November, as record electricity prices drained the utility of cash, but began payment again in March under orders from state regulators.

Although the size of the debt is small in relation to the $3.9 billion in electricity bills that Edison has amassed in the last year, the agreement is significant because it eliminates a creditor that could have helped push the company into involuntary bankruptcy.

Long Beach was approached last week by two large generators--Reliant Energy Inc. and Mirant Corp.--that were looking for the third creditor they would need to sign a petition to force Edison into involuntary bankruptcy proceedings, City Atty. Robert Shannon said.

Some creditors have grown impatient because the state Legislature has not passed a bill to rescue Edison from its financial problems. The Legislature is scheduled to return next Tuesday for a special session devoted to Edison.

“We looked very closely at the bankruptcy option,” Shannon said. But the nine-member Long Beach City Council unanimously approved the settlement in closed session Tuesday evening, he said, because “the city as creditor and the city’s ratepayers, its citizens, are better off with a legislative solution than with Edison in bankruptcy.”

The utility used the settlement to urge lawmakers to pass a rescue bill, arguing that the agreement “is further evidence of the benefits of pursuing negotiated, rather than litigated, solutions.”

“A bankruptcy, in contrast, would lead to years of delay and uncertainty for our customers and raise serious questions about the business climate in California,” the utility said in a statement.

Alternative generators such as Long Beach are an important source of the state’s electricity, and Edison owes such producers more than $833 million for electricity.

Most of the alternative generators that sell their electricity to Edison had sued the company and were trying to get out of their contracts so they could sell their power to the highest bidder. Long Beach sued Edison in February, and in May it was granted a $9-million lien against the company’s assets.

Edison settled with most of the alternative generators in June, agreeing to pay 10% of its debts plus interest immediately and a second 10% if the Legislature passes a bill that allows Edison to sell bonds to repay debt. The remainder would be paid when the bonds were sold. Long Beach accepted the same terms.

The city and a few other generators initially opted to reject the accord and pursue their lawsuits.

But the Long Beach suit, along with four others by alternative generators, was dismissed Sept. 13 by Los Angeles Superior Court Judge Charles W. McCoy, who said jurisdiction over the issues belonged to the Public Utilities Commission.