January 16, 2001
Editor's Note: Southern California Edison cannot make any further comments beyond this 8-K filing and information contained in this press release.
ROSEMEAD, Calif., Jan. 16, 2001-Southern California Edison (SCE) today announced the company was taking additional steps to preserve its cash position in order to ensure it can maintain customer service. The company filed an 8-K with the Securities and Exchange Commission this morning prior to the opening of the market. SCE has temporarily suspended payment of certain of its debt obligations and purchased-power obligations. A copy of the 8-K is available.
The company said its current actions are intended to allow SCE to continue to maintain customer service while a legislative and regulatory solution, which involves both state and federal authorities, is finalized. SCE is working aggressively to cut costs and conserve cash until a permanent solution can be developed among the parties. The company earlier announced it has begun cost-cutting measures aimed at reducing general operating costs by $465 million annually. This plan will ultimately result in about 1,450 to 1,850 job cuts and will reduce near-term capital expenditures to levels that are unsustainable in the long term. The company also suspended its fourth quarter dividend to shareholders.
The company said it takes these steps only reluctantly, and noted that the energy crisis requires a regulatory solution, which is not likely to occur immediately. While SCE is appreciative of and somewhat encouraged by directional progress made during the ongoing power negotiations involving state and federal officials, unfortunately, no definitive agreements have resulted to preclude the necessity of the debt and power payment suspension. Time has simply run out. Nevertheless, the company said it would continue to cooperate fully in the state and federal discussions until such time as a successful conclusion is reached.
Due to exponentially rising power costs governed by the Federal Energy Regulatory Commission, and the artificially low customer rate structure governed by the California Public Utilities Commission, SCE continues to generate significant losses in its electricity purchasing account. Clearly, the California energy market in its current form is dysfunctional. For example, in December 2000, the average price per megawatt-hour increased 900% compared to the same month the year before. With power prices at current levels and lenders now no longer willing or able to extend credit, SCE and the state's other investor-owned public utilities have used an enormous amount of cash just to keep the lights on.
The company reiterated it is doing everything possible to work closely with all the parties involved to resolve this crisis. SCE intends to pay its creditors, vendors and suppliers once a permanent solution to the energy crisis is developed. SCE will then immediately endeavor to create a plan to pay its obligations.
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An Edison International company, Southern California Edison is one of the nation's largest electric utilities, serving a population of more than 11 million people via 4.3 million customer accounts in a 50,000-square-mile area within central, coastal and Southern California.
