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On the same day the parent company of California’s Pacific Gas & Electric Co. proposed a $13.2 billion plan to emerge from Chapter 11, creditors of the state’s other ailing utility moved to drive it into bankruptcy. Power generators Mirant Corp. of Atlanta and Reliant Energy Inc. of Houston are reportedly marshaling support to compel Southern California Edison Co. to file for Chapter 11 protection. “We expect an involuntary filing within the next few weeks, if not days,” said John Barbre, spokesman for Orange County, Calif., Treasurer John Moorlach. “The equation has gone from if Edison goes into bankruptcy to when they will go into bankruptcy.” By law, only three creditors are needed to force a debtor into bankruptcy, and Mirant and Reliant have reportedly been canvassing to enlist a third party for the cause. Orange County, which holds $1 million in SoCal Edison notes, though not averse to bankruptcy for the utility, is not willing to tip the scales. “We aren’t going to be the ones to pull the trigger,” Barbre said. The news comes less than a week after the California legislature adjourned for the year without approving a controversial, state-sponsored rescue plan for SoCal Edison. The state assembly’s plan, which would allow the utility to issue $2.9 billion in bonds secured by ratepayer bills and give the state the option to buy SoCal Edison’s portion of the statewide transmission grid for $2.4 billion, is stuck in the Senate, which sees the plan as too generous. California Gov. Gray Davis has called for a special legislative session to meet Oct. 2 to pass a final version of the plan, which has languished in the legislature since he announced it April 9. SoCal Edison, a unit of Rosemead, Calif.-based Edison International, is holding firm to the state plan. “We are bound and determined to reach a negotiated settlement,” Edison spokesman Brian Bennett said. Although Mirant and Reliant have been pressing their case for months, they intensified pressure on SoCal Edison to file for bankruptcy as the legislative session neared its end, said Robert Shannon, Long Beach, Calif., city attorney. “This is not something that just dropped out of the sky,” he said. “There is a greater sense now that the legislature isn’t going to do anything.” The two power generators have asked Long Beach officials to come on board, but it won’t decide before a Sept. 25 city council meeting. A spokesman for Reliant declined comment. Mirant did not return a call seeking comment. SoCal Edison has said repeatedly it will fight efforts to force it into bankruptcy, and some lawyers say it could mount a significant legal challenge to involuntary filing. However, the Federal Energy Regulatory Commission has found that power generators overcharged the utilities between January and April, when California’s energy crisis was most acute. The agency is deciding on a retroactive price ceiling that could alter the amount of their claims. “If those claims are invalid,” said Mitchell Seider, a bankruptcy partner at New York-based Kramer Levin Naftalis & Frankel, “they may not be able to file for an involuntary” bankruptcy. For creditors to land a debtor in bankruptcy court, they must have claims of at least $10,775 that are not subject to a bona fide dispute. SoCal Edison is likely to challenge Mirant and Reliant on grounds that their claims are in dispute, which under federal bankruptcy law would disqualify the generators’ case. “Surely that’s what Edison would use to defend itself,” said Adam Lewis, a bankruptcy partner at San Francisco-based Morrison & Foerster. Bankruptcy law dictates the generators also would have to prove that SoCal Edison has not made payments on legitimate claims. Bennett said creditors should wait for a legislative solution because a state-sponsored bailout would come more quickly than a settlement forged in bankruptcy court. “They have waited so long, what possible harm could two more weeks do?” he asked. But patience among many of the utility’s creditors has worn thin, Barbre said. And creditors, encouraged by the relative stability and direction that bankruptcy has given PG&E, may be warming up to the idea for SoCal Edison. PG&E’s reorganization plan, submitted Thursday to the U.S. Bankruptcy Court for the Northern District of California, proposes to split parent company PG&E Corp. and utility subsidiary PG&E Co. into separate companies and to repay creditors in full through payments of $9.1 billion in cash and $4.1 billion in notes. Judge Dennis Montali must approve the disclosure statement filed with the court and set a confirmation hearing date for the plan. Meanwhile, PG&E’s thousands of creditors are sure to lobby for changes to the plan. Representing PG&E in the bankruptcy proceeding is San Francisco-based Howard, Rice, Nemerovski, Canady, Falk & Rabkin. The official creditors committee, represented by Los Angeles-based Milbank, Tweed, Hadley & McCloy, has backed the reorganization plan. Copyright (c)2001 TDD, LLC. All rights reserved.

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