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THE CALIFORNIA ENERGY CRISIS

Edison OKs Sale of Grid to State

Energy: The tentative plan would cost California $2.76 billion. But it will mean nothing unless PG&E also agrees to sell its transmission lines.

February 24, 2001|DAN MORAIN MITCHELL LANDSBERG and NANCY RIVERA BROOKS | TIMES STAFF WRITERS

Announcing a significant advance in the struggle to bring stability to California's reeling electricity network, Gov. Gray Davis on Friday unveiled the basic framework of a deal with Southern California Edison that includes the sale of its transmission grid to the state.

But the agreement, made public at a brief news conference in Davis' Los Angeles office, left critical questions unanswered--and was met with skepticism, at best, by consumer advocates, legislators, power generators and Edison creditors.

Davis acknowledged that the deal will be meaningless unless he is able to strike a similar pact with the state's largest utility, Pacific Gas & Electric Co., which has so far resisted his entreaties.

Davis said the pact with Edison would require the state to pay $2.76 billion for the utility's share of the statewide electrical transmission grid. The state would then pay the utility to operate the system. The state also would guarantee bonds to be issued by the firm to pay off its substantial debts.

The governor said the plan offers "real bread-and-butter benefits" for consumers, though some consumer advocates criticized it as half-baked.

"The only folks who are going to benefit from today's proposal are the energy companies, their executives and their shareholders," said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica and the governor's most fiery critic throughout the months-long energy crisis.

Davis said he expects to announce a final deal with Edison within a week. He also said he believes Sempra, the parent of San Diego Gas & Electric, will agree to sell its share of the transmission system next week. As for PG&E, no further talks have been scheduled.

"This is an agreement that provides value to both sides," Davis said. "The utility gets the financial wherewithal to go back in business and keep our lights on. We get commensurate value and specific benefits which provide us long-term power at very cheap rates."

Still, major work remains to be done, and any deal must be approved by the company's board of directors and the Legislature.

"I have to see the details," said Senate President Pro Tem John Burton (D-San Francisco). "It may be the framework, but the devil will be in the details. When it is fleshed out, we'll see."

Edison executives had been weighing the possibility that the firm might have fared better in bankruptcy court. But the utility apparently concluded Friday that the governor's proposal offered its best chance to restructure its multibillion-dollar debt.

"It is tough, and a hard swallow," said a top Edison executive, speaking on condition of anonymity. "But at this point, we are firmly of the belief that this is in the best interest of ratepayers, shareholders and creditors."

Edison Is Coy About Details

On the record, Edison would confirm in a formal statement only that it had reached a preliminary agreement with the governor "to resolve a key aspect of the California energy crisis."

"It is important that together we get on with the work of restoring normalcy to California's electricity situation," said John E. Bryson, chairman and chief executive of the utility's parent company, Edison International.

The utility's executives were nearly as circumspect with their own debt holders, who were brought together Friday afternoon in a previously scheduled conference call.

Ted Craver, Edison International's chief financial officer, said discussions with the governor were "active, generally constructive, and we feel some progress has been made," but he declined to go further despite repeated questioning by debt holders.

Those holding Edison's debts grew increasingly testy during the call as headlines generated by the governor's news conference flashed across the electronic terminals that most of the investment professionals have on their desks. Craver apologized with each non-answer he gave, explaining that Edison had a policy of not discussing the negotiations as they progressed.

"What's fact and what's fiction here?" demanded one investment manager after reciting aloud some of the points that Davis had unveiled for reporters.

"You should attribute as much significance to that as you would to any statement made by the governor," Craver replied cryptically. The executive did give the debt- holders a tidbit of good news: All of Edison's banks have agreed to give the utility an extension until March 14 to pay its bills.

Full Grid Could Cost State $7.3 Billion

In his announcement, Davis said he had agreed to pay $2.76 billion for Edison's share of the electrical transmission grid, about 12,000 miles of the total 32,000-mile system.

That sum amounts to 2.3 times the so-called book value of Edison's share of the system. If the state pays a like sum for the remainder of the statewide system, the price tag would approach $7.3 billion.

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