Edison International subsidiary Southern California Edison Co. Tuesday said an agreement reached with California state regulators will save the utility from filing for bankruptcy protection.
The company said in a statement the accord will “enable SCE to develop a plan to pay off its creditors and prevent another utility bankruptcy in California.” It allows the utility to recover some of its pas power costs.
California Gov. Gray Davis said in light of the agreement he was rescinding a call for a third special session of the legislature to craft a state-supported bailout for SCE. The “settlement has protected the public interest, and will allow the state’s second largest utility to return to financial health,” Davis said. “I am pleased to hear the PUC’s assurance that this can be accomplished without a rate hike.
The settlement, filed in US District Court, came in response to a lawsuit Edison filed nearly a year ago alleging state regulators were preventing Edison from collecting sufficient retail rates to pay for the actual cost of power it was purchasing last year on behalf of its customers.
“Today�s federal court settlement agreement between Edison and the California Public Utilities Commission is a workable way for Edison to become creditworthy, to remove the state from the power business, and to allow Edison to return to its core mission of delivering reliable electricity service,” said Edison International CEO John E. Bryson.
The utility accumulated $3.9 billion in debt buying power on the wholesale market, which it couldn’t pass through to customers because of a retail rate freeze. SCE charged the rate freeze violated federal law and was an unconstitutional taking of property.
Under the settlement agreement, the utility will use cash on hand plus future revenue to cover back debt, much of it owed to generators. The utility can recover certain back debts as of Aug. 31, less cash on hand on that date, with an additional $300 million deducted from the total.
“The amount that will be paid down pursuant to the settlement agreement is estimated to be $3 billion as of the end of this month,” the PUC said of the plan to restore the utility to creditworthiness. SCE agreed not to pay dividends on its common stock through 2003, or on the full payment of its debt, if sooner.
If Edison hasn’t paid off its debt by the end of 2003, the PUC can decide whether Edison will be permitted to pay dividends in 2004.