California power officials declared a Stage Three power alert this morning, meaning rotating blackouts are possible, and an energy supplier threatened to take two utility companies to bankruptcy court.
One of the state's major utilities also announced today it was defaulting on at least $596 million in payments.
The Stage Three alert, which was accompanied by pleas to consumers to conserve as much electricity as possible, meant power reserves had dropped to below 1.5 percent.
California's legislators are meeting today to consider Gov. Gray Davis' plan to deal with the problem.
Taking Edison into Bankruptcy
Houston-based electricity supplier Dynegy Inc. said Monday it would take Southern California Edison and Pacific Gas & Electric to bankruptcy court if they do not make payments due this week.
"When and if they [Edison] default on Thursday, it puts us in a position where we have to take them into bankruptcy, and I'm sure others will be right beside us," Stephen W. Bergstrom, president of Dynegy, told the Los Angeles Times.
Bergstrom refused to say how much money Dynegy is owed but said if any three creditors jointly petitioned the court, it would be enough to start involuntary bankruptcy proceedings.
Dynegy purchased three Southern California power plants when SoCal Edison, PG&E and San Diego Gas & Electric auctioned off assets as part of deregulation. The company's plants can generate enough electricity to supply 2.8 million homes.
Defaulting on Payments
Southern California Edison said today it had temporarily suspended at least $596 million of payments, and was in default to some of its noteholders.
In a filing today with the Securities and Exchange Commission, the unit of Rosemead, Calif.-based Edison International said it has "temporarily suspended" payment due today of $230 million of principal and interest on 5.875 percent notes, $215 million to the California Power Exchange, and $151 million to qualifying facilities, as well as "certain other obligations."
Failure to make the note payment constitutes a default under the notes, as well as a default on SoCal Edison's and Edison International's credit facilities, SoCal Edison said.
SoCal Edison said it took action to allow it to continue to operate while efforts to find a regulatory solution are under way.
Separately, SoCal Edison said it and Edison International plan to postpone release of their fourth quarter and year-end 2000 fiscal results pending further developments.
Lawmakers Look for a Solution
SoCal Edison and Pacific Gas and Electric Co., a unit of San Francisco-based PG&E Corp., have run up billions of dollars of debt this year because they are subject to a rate freeze and have been unable to pass on their skyrocketing wholesale power costs to consumers.
State and federal lawmakers are trying to craft a temporary solution to California's power crisis. Officials met this past weekend with electricity wholesalers to negotiate a plan by Davis for the state to buy electricity and sell it to utilities. That plan was to be introduced today in the Legislature.
The state believes it can negotiate better prices than the utilities, which have seen their credit ratings plummet in recent months. PG&E and SoCal Edison say they have lost more than $9 billion because of wholesale price increases and the state's 1996 deregulation law that froze rate hikes.
Electricity sellers have been increasingly reluctant to supply California because of the utilities' dwindling finances.
Edison owes a major payment today to the Power Exchange, which manages the wholesale buying and selling of electricity. Power industry sources estimate the bill to be more than $150 million but believe the company has the resources to make the payment. Technically, SoCal Edison will not be in default on the payment until Thursday.
On Monday, the state's power reserves shrank to nearly 5 percent even though many businesses were closed for the holiday.
Reuters and The Associated Press contributed to this report.