SoCal Ed Executive Says Utility Unable To Pay CalPX Tuesday

(1/15/01 4:23:12 AM PT)

LOS ANGELES -- Edison International (EIX) unit Southern California Edison is likely to fail to make a payment of several hundreds of millions of dollars due to the California Power Exchange Tuesday for electricity purchases made in the spot market, a senior executive with the utility told Dow Jones Newswires Sunday.

"We don't have the cash to make the payment," the utility official said.

The company executive said it is unclear, however, whether power suppliers have agreed to allow the utility to pay its bill over the course of several months or whether they expect immediate payment.

The utilities make their power purchases through the CalPX, the market where electricity is bought and sold in the state, and the CalPX bills the utilities. Payments the CalPX receives are distributed to power supply companies.

PG&E Corp. (PCG) unit Pacific Gas & Electric also has a payment due to the CalPX Tuesday, but company executives did not say whether they will pay their bill.

Credit rating agencies, such as Standard & Poor's and Moody's Investor Service, which have been closely monitoring the utilities financial crisis, were not available for comment. They are expected to react to the news on Tuesday when the capital markets reopen for business.

Forbearance Of Bills A Possibility

The utilities may be able to delay payment of their bills depending on whether a comprehensive legislative package can be hammered out within the next two days by Gov. Gray Davis, executives with the state's three investor-owned utilities, and other lawmakers.

The plan calls for the state to enter into long-term, fixed-rate power supply contracts with generators for several years.

The state, through its Department of Water Resources, would buy the power and then sell it to the utilities at a reduced rate. The utilities will pass some of the costs on to ratepayers and the difference will be used to pay down the nearly $12 billion in electricity costs SoCal Ed and PG&E Corp. unit (PCG) Pacific Gas & Electric have been unable to pass on to consumers because of a state-mandated rate freeze. That shortfall has pushed the utilities to the brink of bankruptcy.

A key component in Davis' plan would include a forbearance of payment owed to generation companies by the PG&E and SoCal Ed, possibly for 90 days or longer.

But several executives with generation companies taking part in the negotiations said the state would have to provide a letter saying the generators would eventually get paid.

So far, Davis has refused to do that.

Davis said at a news conference Saturday following a marathon seven hour meeting, that the utilities will be forced to take a loss on several billion dollars under his legislative plan.

Negotiations were expected to continue Sunday night with Davis, executives with generation companies and the utilities. Terms of the deal were hung up on how low generators are willing to sell their power supply for and whether there was enough not tied up in contracts already signed with other utilities to meet California's needs.

Davis, who has refused to sign a long-term contract based on the market price for power, is offering a 5.5 cent kilowatt-hour deal for three years. The governor's terms are non-negotiable, an advisor in his office said.

Generators with Southern Co. (SO), Reliant Energy Inc. (REI) and Enron Inc. (ENE) told Dow Jones Newswires that an eight year supply contract would have to be signed in order to get to a 5.5 cent/KWh price.

"The governor wants to make this work for the utilities, but he also has to make it work for us," said one generation executive taking part in the negotiations.

(This story was originally published by Dow Jones Newswires)

-- kevin (ktross@mailcity.com), January 15, 2001

Answers

With PG & E about 70th, and So.Cal. Ed about 170th in the Fortune 500, in size, you've got to think, how long can all this last before if affects the stock market in a big way?

-- Billiver (billiver@aol.com), January 15, 2001.