Southern California Edison faces bankruptcy 12/21/2000 Unable to pay its January power bill, California’s second largest utility—Southern California Edison—may face filing Chapter 11.

In a declaration filed this week with the U.S. Federal Energy Regulatory Commission (FERC), Southern California Edison asked for immediate relief from the high wholesale power prices ravaging the California market since June. In that filing, James Scilacci, the utility’s chief financial officer, said the utility had “no realistic alternative but to seek the protection of the bankruptcy court.”

According to today’s Wall Street Journal, the filing validates what outside speculators long believed—Southern California Edison would be forced to default on its financial obligations.

If Edison doesn’t pay its next big power bill due Jan. 4, generators supplying the market with wholesale power must absorb the loss. And higher risk for generators often means less juice for California, a situation that could again send the state scrambling for power.

This could also prompt the California Independent System Operator to invoke emergency powers conferred upon it last week by U.S. Energy Secretary Bill Richardson. (See “Addressing California’s Power Crisis: the Lady or the Tiger?” in Features & Case Studies for an analysis by Vinson & Elkins on this situation.)

Unless the situation improves significantly, Standard & Poor’s said its ratings on the bonds and other securities of the utility unit of Edison International (Rosemead, CA) and those of Pacific Gas & Electric, a unit of PG&E Corp. of San Francisco, will “drop deeply into speculative trade.”

Meanwhile, governors from the western states met in Denver, CO to discuss the crisis, hoping to formulate a regional solution. And in Washington, FERC continues talks designed to hammer out power purchase contracts that offer a “just and reasonable” price for utilities and generators. The meetings are expected to continue today and then reconvene after the holidays.

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-- Martin Thompson (mthom1927@aol.com), December 22, 2000