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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Steve C Hall X-To: Christian Yoder, Tracy Ngo, Christopher F Calger, Elizabeth Sager X-cc: X-bcc: X-Folder: \Elizabeth_Sager_Jun2001\Notes Folders\All documents X-Origin: Sager-E X-FileName: esager.nsf SoCal Ed Exec Sees Bankruptcy If Lawmakers Reject Deal Updated: Friday, April 20, 2001 02:54 PM?ET ? ? LOS ANGELES (Dow Jones)--Edison International (EIX, news, msgs) unit Southern California Edison will go into bankruptcy if state legislators don't approve a deal for the state to buy the company's transmission lines, an Edison executive told reporters Friday. "It's the agreement or bankruptcy. Legislators need to understand the consequences of having no agreement," said Bob Foster, SoCal Ed's senior vice president of external affairs. "We've had almost a year of instability and chaos, and having 2-3 more years of uncertainty isn't the way to handle public policy." ?In This Article ?Symbol Last Change ?EIX 10.32 -0.66? ?PCG 8.90 +0.17? ?SRE 24.45 -0.65? ?Index ?Dow Jones 10579.85 -113.86? ?NASDAQ 2163.29 -18.85? ? ? It wasn't immediately clear if Foster meant SoCal Ed would declare bankruptcy, or if he thought the utility would be forced into bankruptcy by creditors if legislative approval of the deal falls through. Gov. Gray Davis is having a tough time convincing legislators to accept the deal, which must have legislative backing in order to be implemented. As previously reported, several key lawmakers have said the deal would need to be heavily amended before it could pass. The terms of the deal, signed last week by Davis and Edison International Chief Executive John Bryson, call for the state to buy SoCal Ed's 12,000 miles of transmission lines for $2.76 billion and to allow the utility to issue bonds backed by ratepayers so that it can recoup $5.5 billion in unrecovered power costs. Davis told Senate Democrats Wednesday he would consider amending the agreement based on their input, and asked the lawmakers to appoint a special committee to work with his administration on possible revisions. Foster said that while small changes may be acceptable, the meat of the agreement must not change. "I'd be foolish to say you can't change a word, but the fact is that the essence of the agreement must stay the same. It's an integrated, balanced agreement and it must stay that way. If you pull something out, you need to add something in," Foster said. The deal's "essence" ensures the utility will eventually become creditworthy again, Foster said. As reported, some lawmakers have said ratepayers and taxpayers may be better off if SoCal Ed declares bankruptcy, especially now that PG&E Corp. (PCG, news, msgs) unit Pacific Gas & Electric Co. has sought bankruptcy-law protection and is no longer negotiating with the state. "I still don't see how ratepayers could be any worse off with (SoCal Ed) in bankruptcy than they would with the governor's plan," State Sen. Debra Bowen, D-Redondo Beach, said Thursday. Bowen is chairwoman of the senate energy committee. Bankruptcy would be worse than any perceived shortcomings in the SoCal Ed agreement, Foster said, and the utility will spend the next week trying to educate lawmakers on why that is so. One reason is that the state may need to purchase more "net-short" power to keep the lights on if the utility's contracts with small generators, or qualifying facilities, are rejected by a bankruptcy judge "Twenty-seven percent of our customer demand is met by qualifying facility contracts. If those get rejected, the state's net-short expands from its current 32%...Also, our distribution systems are old and require a substantial amount of investment (to keep running). If we go into bankruptcy, there'll be no investment," Foster said. Foster said he thought legislators' skepticism about the deal was partly due to lack of knowledge about its intricacies. "I believe when members fully understand what this agreement is, they will understand it's decent and preferable to bankruptcy. The agreement is 38 pages but it's packed and requires explanation...there are real benefits here for the state," Foster said. Foster also said it wasn't yet clear whether the deal would require another rate hike on top of the 3-cent-kilowatt-hour increase passed by regulators last month. That's partly because regulators haven't yet determined how revenue from that rate hike will be divided between the utility and the state's Department of Water Resources for its power purchases. "We need to understand how the present rates will be allocated, and that depends on what the DWR is going to need. Under some assumptions we will be able to fit the deal under current rates. If we can get qualifying facility costs to a manageable level and the DWR can clearly indicate what it needs in revenue going forward, it's possible," Foster said. -By Jessica Berthold; Dow Jones Newswires; 323-658-3872; jessica.berthold@dowjones.com
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