Calif. Exhausts Emergency Fund

Tuesday, January 30th 2001, 12:00 am

By: News On 6

SACRAMENTO, Calif. (AP) â€” With California's $400 million emergency fund exhausted, Gov. Gray Davis has ordered more state money be used to keep the lights on in energy-strapped parts of the state.

The Davis administration would not say Monday how much public money would be freed up however, or how long short-term energy buys would remain possible.

The state began buying electricity 12 days ago under emergency legislation that set aside $400 million but that money was spent by late Sunday, Department of Water Resources spokesman Mike Sicilia said.

Davis' decision came as independent auditor KMPG released a report Monday night projecting a grim financial future for Southern California Edison, one of the state's two biggest utilities.

The audit showed SoCal Edison has lost about $4.5 billion because of skyrocketing wholesale electricity costs.

Davis believes the audit supports his contention the state can help Edison and Pacific Gas & Electric Co. out of the crisis without a further rate increase for customers, spokesman Phil Trounstine said.

A similar audit of PG&E was to be released Tuesday.

Critics pounced on the audit as proof of SoCal Edison's fiscal irresponsibility, while the utility said the document verified its dire warnings that the company faced imminent bankruptcy.

SoCal Edison and PG&E claim to have lost a total of $12 billion since June due to soaring wholesale electricity costs associated with the state's 1996 industry deregulation law which bars them from passing those costs onto customers.

Critics pointed to figures showing SoCal transferred nearly $5 billion in dividends to its corporate parent, Edison International, between Jan. 1, 1996, and Nov. 30, 2000. They argue that money would have paid for 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 said.

But 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 its parent company. Profitable companies routinely pay dividends to their corporate owners.

In the five years covered by the audit, Edison International paid its shareholders $1.6 billion and spent an additional $2.7 billion repurchasing the company's stock, a move that also benefited shareholders.

Rates rose dramatically last year amid an energy shortage created by such things as transmission line troubles, low hydroelectric power in the Pacific Northwest, and a large number of power plants taken out of operation for repairs and maintenance.

As things turned bad, SoCal Edison's expenses for electricity exceeded its retail prices by $4.5 billion, digging a hole the utility warns could land the company in bankruptcy court.

SoCal Edison spokesman Steve Conroy declined to discuss the audit at length Monday night, saying company officials were still reviewing it. But he said its summary confirmed the company's financial condition is as dire as Edison officials have been saying.

Ratepayers were not swayed by the latest figures, however.

``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 Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights.

Amid the controversy, lawmakers were continuing to try to reach agreement on a long-term solution to the energy crisis.

One proposal would have the state entering into contracts for as long as 10 years to buy wholesale electricity at a stable price and sell it to Edison and PG&E customers. Another would have the state issue revenue bonds to cover the utilities' debts and make their customers pay the money back over a decade through recently approved rate increases of 9 percent for residential customers and 7 percent to 15 percent for businesses.

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 on Tuesday.

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

â€”â€”â€”

On the Net:

California ISO: http://www.caiso.com

Find the PUC audits: http//www.cpuc.ca.gov