Posted at 6:59 a.m. PST Tuesday, Jan. 16, 2001

Southern California power company in default

NEW YORK (Reuters) - In a move that escalates the California power crisis, embattled California utility Southern California Edison said Tuesday it has temporarily suspended at least $596 million of payments to creditors, and is in default to some of its noteholders.

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.

In mirror filings Tuesday with the Securities and Exchange Commission, SoCal Edison and its parent, Rosemead, Calif.-based Edison International, said that to conserve cash SoCal Edison has ``temporarily suspended'' three payments due Tuesday.

The suspended payments include $230 million of principal and interest on its 5.875 percent notes, $215 million to the California Power Exchange, and $151 million to ``qualifying facilities,'' as well as ``certain other obligations.''

SoCal Edison would run out of cash Feb. 2 assuming it makes all payments when due, the filings said. Bankruptcy remains an option, they said.

``It's an extremely negative sign, and telegraphs the company's intention to take this to the mat,'' said Shawn Burke, head of U.S. investment-grade research at Barclays Capital. ``Unless the legislature pulls a bill out of its hat, giving them virtually all of what they want, it's pretty much over.''

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, the filings said.

SoCal Edison and its parent said they took action to allow the utility to keep operating while efforts to find a regulatory solution are underway.

On Jan. 4, the California Public Utilities Commission recommended a temporary 10 percent rate hike that the utilities, rating agencies and many analysts consider inadequate.

Trading Edison International shares did not begin as scheduled Tuesday. They closed on the New York Stock Exchange Friday at $10-3/16. PG&E shares fell 13/16 to $10-3/4 on the Big Board in early Tuesday trading.

DOWNGRADES LIKELY

The missed payments effectively ensure that credit rating agencies Standard & Poor's and Moody's Investors Service will cut at least some of SoCal Edison's credit and debt ratings to junk status.

When a company misses a debt payment, S&P, for one, ordinarily does not wait for a grace period, if any, to run before cutting its rating for that debt to ``D,'' or default.

A downgrade to below investment-grade status would put SoCal Edison in default of some of its credit lines and bank loans, and ratchet up its liquidity crunch.

``It's difficult to lend if there is no short-term solution, much less a long-term one,'' said Burke.

S&P now rates most of SoCal Edison's senior long- and short-term debt ``BBB-minus'' and ``A-3,'' its lowest investment grades.

Moody's rates the respective debt a roughly equivalent ``Baa3'' and ``Prime-3.''

A third rating agency, Fitch, has already cut SoCal Edison's and Edison International's ratings deeply into junk. The bank loans and credit lines, however, do not contain provisions relating to a Fitch downgrade, analysts said.

DELAYING REPORTING RESULTS

Separately, SoCal Edison and Edison International said they plan to postpone release of their fourth quarter and year-end 2000 fiscal results pending further developments.

SoCal Edison said it will cut as many as 1,850 jobs over the next few months because of the crisis.

Analysts said SoCal Edison is acting now to push California legislators and regulators to craft a remedy fast.

``This is a rugged step toward moving this process along, and forcing California to do something,'' said Jerry Bellucci, senior vice president for Applied Economic Research, a New York-based energy consulting firm.

Burke said SoCal Edison will wait as long as possible to file for bankruptcy protection.

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-- Martin Thompson (mthom1927@aol.com), January 16, 2001