Calif. Power Giant Defaults on Payment

Jan. 16, 2001 -- California power officials declared a Stage Threepower 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 intobankruptcy, 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 saidif any three creditors jointly petitioned the court, it would beenough to start involuntary bankruptcy proceedings.

Dynegy purchased three Southern California power plants whenSoCal Edison, PG&E and San Diego Gas & Electric auctioned offassets as part of deregulation. The company's plants can generateenough electricity to supply 2.8 million homes.

Defaulting on Payments

Southern California Edison saidtoday it had temporarily suspended at least $596 million ofpayments, and was in default to some of its noteholders.

In a filing today with the Securities and ExchangeCommission, the unit of Rosemead, Calif.-based EdisonInternational said it has "temporarily suspended" payment duetoday of $230 million of principal and interest on 5.875 percentnotes, $215 million to the California Power Exchange, and $151million to qualifying facilities, as well as "certain otherobligations."

Failure to make the note payment constitutes a default underthe notes, as well as a default on SoCal Edison's and EdisonInternational's credit facilities, SoCal Edison said.

SoCal Edison said it took action to allow it to continue tooperate while efforts to find a regulatory solution are under way.

Separately, SoCal Edison said it and Edison International plan topostpone release of their fourth quarter and year-end 2000 fiscalresults pending further developments.

Lawmakers Look for a Solution

SoCal Edison and Pacific Gas and Electric Co., a unit of SanFrancisco-based PG&E Corp., have run up billions of dollars ofdebt this year because they are subject to a rate freeze and havebeen unable to pass on their skyrocketing wholesale power costs toconsumers.

State and federal lawmakers are trying to craft a temporarysolution to California's power crisis. Officials met this pastweekend with electricity wholesalers to negotiate a plan byDavis for the state to buy electricity andsell it to utilities. That plan was to be introduced today in theLegislature.

The state believes it can negotiate better prices than theutilities, which have seen their credit ratings plummet in recentmonths. PG&E and SoCal Edison say they have lost more than $9billion because of wholesale price increases and the state's 1996deregulation law that froze rate hikes.

Electricity sellers have been increasingly reluctant to supplyCalifornia because of the utilities' dwindling finances.

Edison owes a major payment today to the Power Exchange, whichmanages the wholesale buying and selling of electricity. Powerindustry sources estimate the bill to be more than $150 million butbelieve the company has the resources to make the payment.Technically, SoCal Edison will not be in default on the paymentuntil Thursday.

On Monday, the state's power reserves shrank to nearly 5 percenteven though many businesses were closed for the holiday.

Reuters and The Associated Press contributed to this report.