SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 13, 1998
Date of earliest event reported: June 24, 1998
SOUTHERN CALIFORNIA EDISON COMPANY
(Exact name of registrant as specified in its charter)
CALIFORNIA 001-2313 95-1240335
(State of principal jurisdiction (Commission file (I.R.S. employer
of Incorporation of number) identification no.
organization)
2244 Walnut Grove Avenue
(P.O. Box 800)
Rosemead, California 91770
(Address of principal executive offices, including zip code)
626-302-1212
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
As previously reported in Part I, Item 1 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, under the heading "California
Electric Utility Restructuring--Utility Rate Reduction and Reform Act
Initiative," on November 24, 1997, individuals representing The Utility Reform
Network, Public Media Center and the Coalition Against Utility Taxes filed a
voter initiative with the California Attorney General. The proposed initiative,
which was amended by the proponents on December 9, 1997, seeks to overturn major
portions of the electric industry restructuring legislation enacted in
California in September 1996 (the "Statute"). The initiative proposes, among
other things, to: (i) impose an additional 10 percent rate reduction for
residential and small commercial customers beyond the 10 percent reduction that
went into effect on January 1, 1998; (ii) block stranded cost recovery of
nuclear investments; (iii) restrict stranded cost recovery of non-nuclear
investments unless the California Public Utilities Commission (CPUC) finds that
the utility would be deprived of the opportunity to earn a fair rate of return;
and (iv) prohibit the collection of any charges pursuant to a financing order
for the purpose of making payments on rate reduction notes, or if the financing
order is found enforceable by a court, require the utility to offset such
charges with an equal credit to customers. Attached as Exhibit 99 is a copy of
the proposed initiative filed with the California Attorney General. On February
11, 1998, the California Secretary of State circulated a copy of the title and
summary prepared for the proposed initiative by the California Attorney
General's office, which included a summary of estimate of the fiscal impacts on
state and local governments if the initiative were to pass. That estimate
concluded that the net impact on state government revenue would be annual
revenue reductions of approximately $100 million per fiscal year from 1998-2002.
The estimate also referred to potential state liability for debt service on the
rate reduction notes.
Under the California Constitution, 433,269 valid signatures were
required to qualify the proposed initiative for the November 1998 statewide
ballot. In May 1998, the sponsors of the proposed initiative commenced filing
sections of the proposed initiative petition with various county elections
officials. County elections officials determined that the proposed initiative
petition sections contained more than 700,000 total unverified signatures. The
California Secretary of State instructed county elections officials, using the
random sample verification method, to determine the number of valid signatures
on the petition sections and certify those totals to it. On June 24, 1998, the
California Secretary of State announced that the proposed initiative qualified
for the November 1998 ballot.
On May 22, 1998, Californians for Affordable and Reliable Electric
Service, a Coalition of California Business Organizations and Utilities
("CARES"), filed a petition for writ of mandate with the Court of Appeal of the
State of California, Third Appellate District (Californians for Affordable and
Reliable Electric Service v. Bill Jones, et al., No. 3 Civ. C029528). CARES is
sponsored by the California Business Roundtable, the California Chamber of
Commerce, San Diego Gas & Electric Company, the California Manufacturers
Association, Pacific Gas and Electricity Company, The California Retailers
Association, and Southern California Edison Company ("SCE"), among other groups.
The CARES petition challenges the proposed initiative as illegal and
unconstitutional on its face, and seeks to remove the proposed initiative from
the November 1998 ballot. On May 27, 1998, the proponents of the proposed
initiative filed a preliminary opposition to petition for writ of mandate. CARES
filed a response to the preliminary opposition on May 29, 1998. On July 2, 1998,
the Court denied CARES' petition. This denial represents a decision by the Court
not to consider the merits of the CARES petition prior to the November election.
On July 6, 1998, CARES filed its appeal of the denial with the California
Supreme Court.
<PAGE>
If the proposed initiative is not removed from the November 1998 ballot
as requested in the CARES petition and is voted into law, further litigation
would ensue. Under the terms of a servicing agreement relating to the rate
reduction notes, SCE (acting as the servicer) is required to take such legal or
administrative actions as may be reasonably necessary to block or overturn any
attempts to cause a repeal of, modification of or supplement to the Statute, the
financing order dated September 3, 1997 (the "Financing Order") issued by the
CPUC, or the rights of holders of the property right authorized by the Statute
and the Financing Order (referred to as transition property), by legislative
enactment, voter initiative or constitutional amendment that would be adverse to
holders of the rate reduction notes. The costs of such actions would be payable
out of collections of the nonbypassable charges established by the Financing
Order and the related issuance advice letter as an operating expense related to
the rate reduction notes. However, SCE may be required to advance its own funds
to satisfy its obligations as servicer to take such legal and administrative
actions.
SCE is unable to predict the outcome of this matter, but if the
initiative were to be voted into law, and not immediately stayed and ultimately
invalidated by the courts, it could have a material adverse effect on SCE's
results of operation and financial position. Upon voter approval of the
initiative, a write-down of a portion of SCE's generation-related assets might
be required under applicable accounting principles, depending on SCE's
assessment of both the probability that the initiative would be struck down by
the courts and the manner in which it would be interpreted and applied to SCE.
The meaning of many provisions of the initiative is unclear and, if all or part
of the initiative is upheld by the courts, will be subject to judicial and
regulatory interpretation. Depending on how the initiative is interpreted and
implemented with respect to SCE, the potential write-down of SCE's
generation-related assets could amount to as much as $1.9 billion after tax.
Additionally, if the initiative were passed and survived legal challenges,
SCE could suffer impacts on its annual earnings, including the possibility of
being required to offset customer charges necessary to pay the principal and
interest on the rate reduction notes. Depending on how this provision and other
provisions of the initiative are interpreted and applied, the annual earnings
reductions could be as large as $210 million in 1999, gradually declining to as
much as $10 million in 2007, and immaterial amounts thereafter.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired. Not applicable
(b) Pro Forma Financial Information. Not applicable
(c) Exhibits
Exhibit
No. Description
------- -----------
99 Proposed Initiative (No. SA 97 RF 0064)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHERN CALIFORNIA EDISON COMPANY
(Registrant)
KENNETH S. STEWART
----------------------------------------------------------
KENNETH S. STEWART
Assistant General Counsel
July 13, 1998
<PAGE>
EXHIBIT 99
December 5, 1997
Linda Catabolic, Senior Assistant Attorney General
Office of the Attorney General
1300 "I" Street, Suite 125
P.O. Box 944255
Sacramento, CA 94244-2550
Re: Proposed Initiative No. SA 97 RF 0064
Amendments to the Proposed Initiative
Dear Ms. Catabolic:
The undersigned proponents of Proposed Initiative No. SA 97 RF 0064 hereby
request that certain amendments be made to that proposed measure. Pursuant to
your letter of November 24, 1997, we submit this amendment package, which
includes this request letter with the original signatures of the proponents, and
the complete text of the measure as amended.
The following briefly describes the changes that we would make in these
amendments:
- -- Section 368.1(c): The word "the" was added to improve the sentence structure.
The proponents do not believe this constitutes a substantive amendment.
- -- Section 367.1(a): In the last clause, the phrase "from market contracts with
the Independent System Operator" was changed to "in contracts with the
Independent System Operator." This change was intended to clarify the intent
that the nuclear generation-related costs could be collected from ISO revenues
whether or not the revenues derive from "market contracts" between the utility
and the ISO.
- -- Section 367.2(a): This subsection was rewritten in order to clarify the
original version. The proponents believe that the changes are editorial in
nature, and do not effect the substance of this subdivision.
- -- Section 367.2(b): This subsection was amended in two ways. First, the
citation to the existing Public Utilities Code Section was incorrect in the
original version; rather than citing Section 381(c)(3), the original cited
Section 381(b)(3). Second, the provision was broadened to cover all "qualifying
facilities" designated as such pursuant to the federal Public Utility Regulatory
Policies Act of 1978 (PURPA). The proponents had intended to have such coverage
in this subsection, but inadvertently cited an existing PU Code section that
refers only to qualifying facilities that are fueled by renewable resources.
- -- Section 841.1: The amendment changes the date on which investors are deemed
to be on notice to November 24, 1997, the date the proposed initiative was
received by the Attorney General's Office. The original contained the date of
November 15, 1997.
<PAGE>
- -- Section 1701.5(c): The amendment makes clear that the judicial review
described in that subsection will occur at the state court of appeals.
In summary, we believe that many of the changes we have submitted are editorial,
rather than substantive. However, it seemed prudent to err on the side of
caution and provide all of them prior to December 9, 1997 date specified in your
letter.
Thank you for your attention to this matter. Please let us know if there is any
further information or clarification that we can provide.
Yours truly,
[ORIGINAL SIGNATURE PAGE ATTACHED]
Nettie Hoge
The Utility Reform Network (TURN)
Elisabeth Robinson Gunther
Public Media Center
Harvey Rosenfield
Coalition against Utility Taxes (CUT)
cc: Michelle Olson, Initiative Coordinator
<PAGE>
Nettie Hoge
- -----------------------------------------
Nettie Hoge
Elisabeth Robinson Gunther
- -----------------------------------------
Elisabeth Robinson Gunther
Harvey Rosenfield
- -----------------------------------------
Harvey Rosenfield
<PAGE>
The Utility Rate Reduction and Reform Act
SECTION 1. Findings and Declaration
The People of California find and declare as follows:
The cost and dependability of California's electric utility service are
threatened by a new law that was intended to reduce regulation of electric
utility companies in this state.
Any change in the way electricity is sold should benefit all electric utility
customers, including residential and small business customers, and should result
in a fair and competitive marketplace.
Instead of creating a fully competitive market for electricity, the new law
unfairly favors existing electric utility monopolies by forcing customers to pay
rates more than 40 percent higher than the market price in order to bail out
utilities for their past bad investments.
As a result of this $28 billion bailout for electric utility companies, the
average California household will pay more than $250 more per year for
electricity than they would in a fully competitive market.
Residential and small business customers should not be required to bear the
costs of bonds used by utility companies to pay for past bad investments.
It is against public policy for residential and small business customers to be
required to pay for the imprudent and uneconomic decisions of electric utility
companies to invest in nuclear power plants which the public did not want and
which threaten the health and safety of this state.
Under the new law, deregulation of electric utility companies may result in
marketing abuses that harm residential and small business customers. Such abuses
may include the selling of information about these customers to other companies
for profit.
Therefore, the People of California declare that it is necessary to protect
residential and small business customers from unfair and unjustified taxes and
surcharges that will force them to subsidize electric utility companies. It is
also necessary to ensure that residential and small business customers directly
benefit from deregulation of electric utility companies.
SECTION 2. Purpose
The purpose of this chapter is to:
1. Reduce residential and small commercial electricity rates by 20 percent to
assure that these customers receive a direct benefit from the transition to the
competitive marketplace for electricity.
2. Prohibit taxes, surcharges, bond payments or any other assessment from being
added to electricity bills to pay off utility companies' past bad investments in
nuclear power plants and other generation-related costs.
3. Prohibit bonds from being used to force residential and small business
customers to pay for past bad investments by electric utility companies.
4. Provide for fair and public review of California Public Utilities Commission
decisions related to electricity price and services.
5. Protect the privacy of utility customers and provide the information
consumers need to obtain low cost and high quality electric service.
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<PAGE>
SECTION 3. The following Sections are added to the Public Utilities Code:
Electric Utility Rate Reduction
Section 368.1
(a) No later than January 1, 1999, electricity rates for residential and small
commercial customers shall be reduced so that these customers receive rate
reductions of at least 20 percent on their total electricity bill as compared to
the rate schedules in effect for these customers on June 10, 1996.
(b) The rate reductions described in subsection (a) shall be achieved through
cutting payments to electric corporations for their nuclear and other uneconomic
generation costs as described in Section 367.1 and 367.2.
(c) No utility tax, bond payment, surcharge, or any other assessment in any form
shall be levied against any electric utility customer to pay for the rate
reductions described in subsections (a) and (b).
Prohibition Against Utility Taxes, Bond Payments, Surcharges or Any Other
Assessments to Pay For Nuclear Power Plants
Section 367.1
(a) Effective immediately, costs for nuclear generation plants and related
assets and obligations shall not be paid for by electric utility customers,
except to the extent that such costs are recovered by the sale of electricity at
competitive market prices as reflected in independent Power Exchange revenues or
in contracts with the Independent System Operator.
(b) No utility tax, bond payment, surcharge or other assessment in any form
shall be levied against any electric utility customer for the recovery of
nuclear costs described in subsection (a).
(c) This section shall not apply to reasonable nuclear decommissioning costs as
referenced in Section 379 of the Public Utilities Code.
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<PAGE>
Limitation On Utility Taxes, Bond Payments, Surcharges, and Any Other
Assessments To Pay for Electric Utility Company Investments in Non-Nuclear
Generation Assets
Section 367.2
(a) Effective immediately, costs for non-nuclear generation plants and related
assets and obligations shall not be recovered from electric utility customers
under the cost recovery mechanism provided for by sections 367 through 376 of
the Public Utilities Code except to the extent that such costs are recovered by
the sale of electricity at competitive market rates from independent Power
Exchange revenues or from contracts with the Independent System Operator, unless
the electric utility first demonstrates to the satisfaction of the Commission at
a public hearing that failure to recover such costs would deprive it of the
opportunity to earn a fair rate of return.
(b) This section shall not apply to costs associated with renewable non-nuclear
electricity generation facilities described in Section 381(c)(3), or to costs
associated with power purchases from qualifying facilities pursuant to the
Public Utility Regulatory Policies Act of 1978 and related commission decisions.
Prohibition Against Utility Taxes, Bond Payments, Surcharges and Any Other
Assessment to Pay for Securitization Bonds.
Section 840.1
Notwithstanding current Sections 840 through 847 of the Public Utilities Code:
(a) No electric corporation, affiliate of an electric corporation or any other
financing entity shall assess or collect any utility tax, bond payment,
surcharge or any other assessment authorized by a Public Utilities Commission
financing order issued pursuant to Sections 840 through 847 of the Public
Utilities Code for the purpose of paying principle, interest or any other costs
of any bonds authorized by those sections.
(b) The Public Utilities Commission shall not issue any financing order pursuant
to Sections 840 through 847 after the effective date of this measure.
(c) Any electric corporation, affiliate of an electric corporation or any other
financing entity which is subject to a financing order issued under Section 841
that is determined by a court of competent jurisdiction to be enforceable
despite subsection (a) of this section, shall offset any utility tax, bond
payments, surcharge, or other assessment described in subsection (a) collected
from any customer with an equal credit to be applied concurrently with the
collection of the utility tax, bond payment, surcharge or other assessment.
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<PAGE>
Section 841.1
Any underwriter or bond purchaser who purchases rate reduction bonds after
November 24, 1997 issued pursuant to current Sections 840 through 847 shall be
deemed to have notice of the provisions of Sections 367.1, 367.2, 368.1, and
840.1
Public Participation and Judicial Review for Consumer Protection and Electric
Company Accountability
Section 1701.5
(a) Any action or proceeding of the Public Utilities Commission pursuant to
Section 367.1, 367.2, 368.1 and 840.1 of the Public Utilities Code shall require
a public hearing where evidence is taken by and discretion is vested in the
Public Utilities Commission.
(b) Any change to the amount of above-market costs for non-nuclear generation
plants and related assets and obligations being recovered from utility customers
shall only be made after the electrical corporation has provided notice to the
public pursuant to Section 454 of the Public Utilities Code.
(c) Any action or proceeding to attack, review, set aside, void or annul a
determination, finding, or decision of the Public Utilities Commission relating
to electric restructuring under Chapter 2.3 of Part I of Division 1 of the
Public Utilities code and financing of transition costs as described in Article
5.5 of Chapter 4 of Part I of Division 1 of the Public Utilities Code shall be
in accordance with the provisions of Section 1094.5 of the Code of Civil
Procedure. In any such action the writ of mandate shall lie from the court of
appeals to the Public Utilities Commission. The court shall not exercise its
independent judgment but shall only determine whether the determination, finding
or decision of the Public Utilities Commission is supported by substantial
evidence in light of the whole record.
Electric Utility Customer Privacy Protection
Section 394.1
The confidentiality of residential and small commercial customer information
shall be fully protected as provided by law. No entity providing electricity
services including an electric corporation shall provide information about a
residential or small commercial customer to any third party without the express
written consent of the customer.
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<PAGE>
Electric Utility Customer Information
Section 393
The Public Utilities Commission shall require each electric utility or electric
service provider to provide such information or materials with each utility bill
issued to residential and small commercial customers as the Commission
determines to be necessary to assist consumers in obtaining low cost, high
quality electric service options, including electric service options that reduce
environmental impacts such as those that rely on renewable energy sources and to
protect consumers' interest in all matters concerning safe and dependable
delivery of electric service.
Definitions
Section 330.1 Definitions of Charges
(a) "Utility Tax" "bond payments" "surcharge", "assessment" or "involuntary
payment" mean any charge that serves to permit an electric corporation to
recover the value of uneconomic assets from ratepayers, and includes but is not
limited to a "fixed transition amount" as defined by Section 840(d), and the
"competition transition charge" that is the nonbypassable charge referred to in
Sections 367 to 376, inclusive.
(b) For purposes of Sections 330.1, 367.1, 367.2, 368.1, 393, and 840.1, the
terms "electric utility", "electric utility company", and "electric corporation"
have the same meaning as the term "electrical corporation" as defined in Section
218 of the Public Utilities Code.
Repeal of Existing Law
Sections 367(a), 368(d), 368(h) of the Public Utilities code are repealed.
SECTION 4. Initiative Integrity
(a) This act shall be broadly construed and applied in order to fully promote
its underlying purposes, and to be consistent with the United states
Constitution and the Constitution of the State of California. If any provision
of this initiative conflicts directly or indirectly with any other provisions of
law, including but not limited to the cost recovery mechanism provided for by
Sections 367 through 376 of the Public Utilities Code, or any other statute
previously enacted by the Legislature, it is the intent of the voters that those
other provisions shall be null and void to the extent that they are inconsistent
with this initiative and are hereby repealed.
(b) No provision of this act may be amended by the Legislature except to further
the purpose of that provision by a statute passed in each house by roll call
vote entered in the journal, two thirds of the membership concurring, or by a
statute that becomes effective only when approved by the electorate. No
amendment by the Legislature shall be deemed to further the purposes of this act
unless it furthers the purpose of the specific provision of this act that is
being amended. In any judicial action with respect to any legislative amendment,
the court shall exercise its independent judgment as to whether or not the
amendment satisfies the requirements of this subsection.
5
<PAGE>
(c) If any provisions of this act or the application thereof to any person or
circumstances is held invalid, that invalidity shall not effect other provisions
or applications of the act that can be given effect in the absence of the
invalid provision or application. To this end, the provisions of this act are
severable.
(d) It is the will of the People that any legal challenges to the validity of
any provision of this act be acted upon by the courts upon an expedited basis.
6
