Bankruptcy for Southern California Edison more likely

By Ann de Rouffignac
OGJ Online

HOUSTON, Sept. 20, 2001 — California Senate Pres. John Burton denounced Gov. Gray Davis’s plan to bail out Southern California Edison Co., prompting unconfirmed reports some creditors are now willing to seek involuntary bankruptcy for the utility unit of Edison International.

In remarks on the Senate floor, the San Francisco Democrat also strongly indicated that any further attempts to pass such legislation in the Senate would be difficult. During a second extraordinary session called by the governor, the state Assembly passed a bill Davis and SCE favored. The Senate previously approved a less generous package. The Senate did not take action on the Assembly version before the close of the session last week. Davis has threatened to call lawmakers back for a third special session.

“We should have taken it up and killed it—just like we should have taken up the MOU (original agreement between the governor and Edison) and killed it and put this baby to bed once and for all,” according to a transcript of Burton’s comments from the Senate session. “But we didn’t want to embarrass the governor by taking the bill and getting it seven votes. It would have been a rip off of residential people to help big business and bail out a corporation.”

With hope for a bill to rescue Edison fading fast, talk of generators who are SCE creditors forming a committee that would push for involuntary bankruptcy swept the industry. The utility is buried under $3.9 billion of debt incurred when it bought high-priced power on the wholesale market but was unable to pass through the higher costs to retail ratepayers. Independent generators sold much of the power to SCE and are still waiting to get paid.

Generators that don’t have long-term contracts to sell power to the state of California were making calls to see if a creditors committee could be formed, according to published reports. Generators reasoned, industry sources explained, they would probably fare better under a federal bankruptcy judge than under legislation that would probably be held up in court for years.

Reliant Energy Inc., Houston, and Mirant Corp., Atlanta, Ga., which have no long-term contracts with the state for their existing power plants in California, were reportedly “making calls to other creditors,” sources close to generators in California said.

A Reliant Energy spokesman said he had “no comment” on the reports, and Mirant did not return calls. In the past, Edison officials have repeatedly said the company doesn’t plant to file for protection under US bankruptcy laws.

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