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)
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.
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)
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