Calif. utility is broke after making billions

Brian Melley

Tuesday, Jan. 30, 2001 | 11:26 a.m.

SACRAMENTO -- Critics of Southern California Edison pounced on an audit showing the cash-strapped utility reaped nearly $5 billion in dividends in the years leading up to California's energy crisis, saying Edison "took the money and ran."

The $4.8 billion the power company transferred to its corporate parent, Edison International, between Jan. 1, 1996, and Nov. 30, 2000, would have covered the massive bill it has run up since May as it has paid soaring prices for wholesale electricity during a time of near-constant shortages.

"Basically they took the money and ran. Had they not done that they would not be in the financial problem they are in," Senate President Pro Tem John Burton, D-San Francisco, said late Monday night. "If ratepayers bail them out, ratepayers should get something in return, like power lines or something."

Consumer advocate Harvey Rosenfield agreed, saying an audit of SoCal Edison's finances shows that "for all the money Edison claims it is paying out to purchase electricity, it has also been making a lot of money."

"This does not paint a devastating picture of the company. It has made a lot of money in the past and now it has some losses. This does not support the politicians' efforts to bail out the company," said Rosenfield of the Foundation for Taxpayer and Consumer Rights.

The audit's release Monday night came as legislators struggled to find a solution to an energy crisis in which California's two largest utilities, SoCal Edison and Pacific Gas & Electric, say they have been driven to the point of bankruptcy. A similar audit of PG&E was expected to be released today.

SoCal Edison vice president Thomas Higgins said money that went to the utility's parent company paid back investments the shareholders made in power plants.

"It seems to me that there is no escaping that the debt we incurred is legitimate, prudent and reasonable debt," Higgins said. "So I hope the solution allows recovery, that is the only way we can be truly creditworthy."

With SoCal Edison and PG&E no longer able to find wholesalers who will sell them electricity on credit, the state stepped in two weeks ago, creating a $400 million emergency fund to buy power and pass it on to consumers.

That fund is now exhausted, and Gov. Gray Davis is using his emergency authority to keep buying electricity, according to Mike Sicilia, a spokesman for the state Department of Water Resources.

Meanwhile, the California Independent System Operator, manager of the state's power grid, put California under a Stage 3 alert for a record 15th consecutive day today. Blackouts were not expected.

Such alerts mean state energy reserves are seriously low and mandatory blackouts are possible, although state officials said blackouts like those that occurred on two separate days earlier this month didn't appear likely today.

Independent auditor KPMG, which reviewed SoCal Edison's finances at the request of the state Public Utilities Commission, found nothing unusual about the payments the utility made to Edison International. Profitable companies routinely pay dividends to their corporate parents or owners.

Edison in turn used the payments to enrich its shareholders, who recently have been battered by a sharp decline in the parent company's stock. The company paid $1.6 billion to shareholders during the five years covered by the audit and spent an additional $2.7 billion repurchasing company stock, a move that also benefitted shareholders.

SoCal Edison's financial crisis prompted Edison International last month to suspend its shareholder dividends for the first time in 91 years. SoCal Edison's other cost-cutting moves included a hiring freeze, putting all executives on leave without pay Christmas week and eliminating their 2001 merit raises, the audit said.