Southern California Edison, coming off its best financial year, stepped up diversification efforts Thursday by announcing plans to create a holding company to increase its reliance on businesses other than making and selling electricity to the public.
Rosemead-based Edison also announced a dip in profit for the first quarter, the result of a $66-million writeoff on two nuclear plants that wasn't quite offset by an accounting change shifting certain revenue from one quarter to another.
Edison earnings fell 7% to $181.7 million for the quarter, shareholders were told at the company's annual meeting.
The electric utility, echoing moves by utilities in California and elsewhere, said it will seek regulatory approval to establish a holding company that would oversee a "measured, deliberate" expansion of unregulated business ventures.
Chairman Howard P. Allen said Edison, one of the nation's biggest electric power companies, hopes to increase the share of its income--currently less than 1%--that comes from non-utility operations.
A similar request from San Diego Gas & Electric ran into criticism from members of the California Public Utilities Commission. The PUC attached several restrictions to a planned holding company, prompting the San Diego utility to rethink its plans.
Pacific Lighting, the parent of Southern California Gas, is well along on a diversification strategy that has seen it buy Thrifty Drug and become, among other things, one of the nation's biggest operators of sporting goods stores.
Edison would stick to "enterprises related to our core business," Allen said. "Formation of a holding company with clear separation between our regulated and non-regulated businesses will allow the company to diversify its businesses and supplement the electric utility's earnings with non-regulated business earnings."
A holding company could sell stock to raise funds for non-utility enterprises, something the PUC wouldn't permit Edison itself to do. Establishment of a holding company is at least a year away, and Edison said it has "no plans at this time" to sell stock.
PUC officials have voiced concern that the utility and other businesses would become intertwined and that the failure of an unregulated subsidiary could financially damage the utility itself--threatening affordable energy for the public.
William Ahern, head of the PUC division charged with looking out for utility customers' interests, said Edison's plan for a holding company is a change in strategy. He said Edison previously told the commission that it was satisfied with the current subsidiary status of its unregulated operations.
Edison has posted record earnings for six straight years, and plummeting energy prices last year saved the firm nearly $800 million in fuel and power costs. The company also added a record 100,000 customers last year, its common stock price reached an all-time high and the utility boasted of a total return to shareholders of 36%.
Edison's non-utility operations, all established last year with $156 million in retained earnings, are Mission Energy Co., which is developing cogeneration and other electric-generation projects; Mission Power Engineering Co., a consulting business, and Mission Land Co., which owns and operates several industrial parks in Southern California.
Those entities, as well as Edison, would become subsidiaries of the holding company. The change would require both PUC and shareholder approval.