From: miyung.buster@enron.com
To: filuntz@aol.com, liz@luntz.com, nicholas.o'day@enron.com, mike.dahlke@enron.com, jennifer.rudolph@enron.com
Cc: steven.kean@enron.com
Date: 2000-10-05 10:31:00+00:00
Subject: SoCal Ed May Seek Temporary Return To Cost-Based Rates

SoCal Ed May Seek Temporary Return To Cost-Based Rates
By Jason Leopold
  
09/29/2000 
Dow Jones Energy Service 
(Copyright (c) 2000, Dow Jones & Company, Inc.) 
LOS ANGELES -(Dow Jones)- Southern California Edison may ask federal 
regulators next week to allow the state's electricity market to temporarily 
return to regulation until the market produces lower wholesale power rates, a 
company executive told Dow Jones Newswires. 
In addition, a filing expected before the Federal Energy Regulatory 
Commission by SoCal Edison, a unit of Edison International (EIX), will ask 
for an immediate investigation into California's power market, different from 
an investigation FERC is currently conducting here. 
"This (investigation) would request a formal proceeding where federal 
regulators would take testimony," said Bob Foster, senior vice president of 
public affairs for SoCal Edison. "This would be a much more vigorous 
proceeding" than the probe federal regulators are currently conducting into 
California's power market. 
"This market is not producing just and reasonable rates," Foster said. "It is 
producing power prices that are two to three times higher than the rest of 
the country ... the market is in dire need of a fix," Foster said. 
Foster said the FERC filing is still a work in progress, but one of the 
solutions the utility plans on including in the filing is no longer having 
the market dictate the cost of wholesale power. 
Instead, Foster said the utility favors a temporary return to regulation in 
the form of cost-based rates, where the price of wholesale power is decided 
by how much it costs for a generation unit to produce the electricity. 
"That's the way they used to do it in the old days," Foster said, adding that 
the utility will include a variety of solutions to FERC on how to repair the 
state's wholesale power market. "It's a return to regulation, but going back 
toward a cost-based system is viewed only as an interim measure." 
Foster said if FERC does not take immediate action and the market continues 
as is "they will have unbelievable amount of rebellion on their hands." 
He said the utility is also deciding whether to ask FERC to impose price caps 
on wholesale power or bid caps on other markets operated by the state's Power 
Exchange. 
         Utility Sinking Deeper Into Debt   

Foster said SoCal Edison is being forced to borrow millions of dollars to 
cover the difference between what it pays for wholesale power and what it 
charges its customers during the rate freeze. 
The company's stock has been taking a beating in recent weeks as Wall Street 
learned about the utility's $2 billion debt. 
Current wholesale power prices are about 20 cents/KWh, but the utility 
charges its customers about 3 to 4 cents/KWh. 
That could end if SoCal Edison convinces state regulators that it recovered 
its stranded costs related to the sale of its power plants. 
The utility's recent filing to the Securities and Exchange Commission 
suggests that the pending sale of its hydro generating assets will allow it 
to end the rate freeze and start charging its customers market-based rates. 
But Foster said the company wants to protect its customers. 
"We believe the rate freeze is going to end sooner or later and consumers 
cannot be exposed to a volatile market," Foster said. "Our primary goal is to 
protect consumers and provide them with affordable, reliable and predictable 
rates." 
Still, the utility is going to have to convince state regulators of its 
intentions. Foster said the company will file with the Public Utilities 
Commission soon, possibly to lift the rate freeze, based on the pending sale 
of its hydro assets, and to raise its rates. 
"We don't want to have California in a state of chaos," Foster said. "We hope 
to have a cooperative agreement with state regulators when the time comes." 
   -By Jason Leopold, Dow Jones Newswires; 323-658-3874;
jason.leopold@dowjones.com