Another trial balloon: Edison threatens bankruptcy unless CA ,
 SoCal Ed Exec Sees Bankruptcy If Lawmakers Reject Deal 
	
	
	Updated: Friday, April 20, 2001 02:54 PM?ET 
	
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	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." 
	
	

	
	

	
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	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
christian.yoder@enron.com, tracy.ngo@enron.com, christopher.calger@enron.com, 