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Calif. Makes Tentative Deal for Power Grid
L O S A N G E L E S, Feb. 23 -- After a week of intense closed-door negotiations with utility representatives, Gov. Gray Davis said today he had reached an "agreement in principle" with Southern California Edison to buy the utility's power lines for an estimated $2.7 billion.
The deal also requires Edison International, the parent company of Edison, to sell cheap power to the state for a decade.
"This is the framework of a good, balanced deal," Davis said. "It's not a final deal. There's a lot of work to be done. But we're making progress."
The governor said he did not expect customer rates to increase as a result of the deal.
Edison did not immediately return calls seeking comment.
Trying to Avert Bankruptcy
The state has been in talks for a week to buy a total of 26,000 miles of transmission lines from Edison, Pacific Gas and Electric and Sempra Energy, which operates San Diego Gas & Electric. The total cost of the lines could range from $4.5 billion to $7 billion.
The effort is intended to help restore the financial health of the state's two largest utilities, PG&E and Edison, both of which are near bankruptcy. The $2.7 billion price for the Edison lines amounts to 2.3 times the estimated book value, Davis said.
The utilities say they have lost nearly $13 billion since June, trapped between soaring wholesale power prices and state-imposed rate caps for consumers. The tentative plan announced by Davis would allow Edison to issue bonds for a substantial portion of its losses.
Davis said the state is making good progress in its talks with Sempra and "some progress" with PG&E. Thursday, Davis said he will not sign off on any grid buyout without all three utilities' participation.
"I do not believe we can make a satisfactory arrangement without 60 percent of the transmission grid, and that would require cooperation with PG&E," he said today.
PG&E spokesman Ron Low said Thursday night that talks had ended with no resolution that day.
"These are complicated problems that will not be solved overnight," Low said. "There are clearly some issues where we are very far apart."
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