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Utility woes deepen
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January 16, 2001: 2:53 p.m. ET
Southern California Edison skips debt payment in move to conserve cash
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NEW YORK (CNNfn) - Southern California Edison, one of two utilities caught in California's power crisis, said Tuesday it will temporarily halt at least $596 million in various debt payments to conserve cash, a move that pushes the financially troubled company closer to bankruptcy.
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In a filing with the U.S. Securities and Exchange Commission, the state's second-largest utility said it took the actions "to conserve cash, and (that it) has been forced to consider further alternatives for conserving cash, so that it can continue to provide service to its customers."
The debts include $230 million of principal and interest on its debt, $215 million to the California Power Exchange, and $151 million to "qualifying facilities," as well as "certain other obligations."
San Francisco-based  Pacific Gas and Electric Co. (PCG: Research, Estimates) and Southern California Edison Co., a unit of Rosemead, Calif.-based Edison International (EIX: Research, Estimates), have racked up billions of dollars in debts since June.
Under California's 1996 deregulation law, the utilities have been unable to pass on the skyrocketing cost of wholesale electricity to their customers. Low supplies of electricity have pushed the state to the verge of power blackouts.
In the government filing, Edison reported cash reserves totaling about $1.2 billion as of Jan. 15. If all credit payments were made on time, the company would run out of cash Feb. 2.
"SCE is attempting to avoid bankruptcy," the company said.
The utility suggested it eventually will pay its bills once the climate clears, but warned "the crisis requires a regulatory solution, which is not likely to occur immediately." The company already has launched cost-cutting efforts, with the announcement last week that it would trim its workforce by about 13 percent, affecting between 1,450 and 1,850 jobs.
The company also has postponed the release of its financial results for the fourth quarter and year-end 2000.
Click here to see how other utility stocks are doing today
Shares of Edison International fell 63 cents to $9.56 Tuesday afternoon, while PG&E stock lost $1.19 to $10.38.
Credit-rating agency Moody's cut its ratings on about $9.3 billion of senior unsecured debt for both companies to non-investment grade "junk'" status.
Moody's said SoCal Edison's action "increases the specter" of its filing for
bankruptcy and said there is a "high likelihood" such a bankruptcy would lead to a bankruptcy for parent company Edison International.
Meanwhile, Standard & Poor's cut the ratings of Pacific Gas & Electric and its parent company to low junk grades, triggering default provisions on various credit lines and bank loans for the utility and the parent. The rating service said SoCal Edison's decision to default "diminishes the prospects" for PG&E to tap the capital markets for cash.
"Neither legislative nor negotiated solutions to the state's utilities' financial meltdown appear to be forthcoming in a timely manner, which continues to impede access to financial markets for the working capital needed to avoid
insolvency," S&P said.
The moves come as the California Legislature prepares to consider a bill that would allow the state to buy electricity and sell it to utilities. The state believes it can negotiate better prices than the utilities.
Earlier this month, the California Public Utilities Commission recommended granting the utilities a temporary 10 percent rate increase. But the utilities, rating agencies and many analysts called such a surcharge inadequate. 
-- from staff and wire reports
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