Southern California Edison Co.’s agreement with state regulators calls for the utility to pay past due debts to generators, but there is a need to “work out what exactly we pay them,” SCE CEO John Bryson said Wednesday.
The California Public Utilities Commission and Edison International, SCE’s corporate parent Tuesday reported reaching a settlement agreement of a federal lawsuit SCE brought against the PUC. Southern California Edison said the accord will save the company from bankruptcy. It must still be approved by the judge.
Under the agreement, SCE can leave electricity rates at existing levels of about 10.3¢/kw-hr through 2005 to pay off more than $3 billion in debts. CFO Ted Craver said the utility should have enough cash in hand to pay its power procurement debts by the first quarter of 2002. The settlement calls for the utility to pay off all debt by 2003.
Among other provisions, the agreements calls for the utility to join state efforts to seek refunds from the generators for alleged overcharges. Bryson said the utility will sit down with the generators to determine what is owed on a “fair basis.”
He noted Southern California Edison’s debt is not owed directly to the generators but to the defunct California Power Exchange and the California Independent System Operator. “The generators stand behind them,” he said.
It is unclear how the accord would be affected if the parties stalemated over the payments. The state of California has demanded generators refund $9 billion in alleged overcharges for electricity sold in the state. The case is pending at the Federal Energy Regulatory Commission. Generators made an offer that was rejected by the state as too low.
DWR outside the deal
Bryson said he didn’t know how long the California Department of Water Resources would continue to be responsible for purchasing the utility’s net short– the amount of electricity needed to serve Southern California Edison’s customers over and above what is supplies from generation the company still owns.
The utility could begin to buy power once it is considered an investment grade credit and that is dependent on the company paying off its debts. Bryson said the issue wasn’t covered in the agreement and will have to be worked out in the future.
He said Southern California Edison is prepared to resume electricity purchases, if the PUC guarantees the company will be able to recover its costs in the future and if the company is back on a firm financial footing. “You need credit to do the job right,” he said.
Southern California Edison was pushed to insolvency because of a retail rate freeze, which prohibited the company from passing on the full cost of wholesale electricity purchases. The state stepped in on behalf of the state utilities to buy power in January and has since signed long-term electricity supply contracts with a number of generators.
Even if Southern California Edison takes over from the state, “we would never be on the hook for those contracts,” Bryson said. He also said the utility will seek hedging authority to protect consumers from natural gas and power price spikes.
Tuesday California Gov. Gray Davis praised the settlement agreement and rescinded his call for a third special session of the legislature to craft a state-sponsored rescue package for Southern California Edison. Consumers groups opposed the agreement. Bryson said the judge has given them until Wednesday to file briefs and the utility until Thursday to respond, before he issues a decision.