EDISON POSTS BIG LOSS STATE'S ENERGY CRISIS SAPS UTILITY OF $2.55 BILLION.

Byline: Gregory J. Wilcox Staff Writer

California's energy crisis brought more financial pain to Edison International on Tuesday as the company posted a $2.55 billion fourth-quarter loss related to turmoil at its Southern California Edison electric utility subsidiary.

The loss, equal to $7.83 per share, was attributed to a $2.5 billion write-off at SEC for financial accounting of regulatory assets as they relate to rising wholesale power costs.

By comparison, during the 1999 fourth quarter, Edison earned $96 million, or 28 cents a share.

Revenue totaled $2.591 billion for the year's final three months vs. $2.516 billion in the 1999 fourth quarter.

The company said the write-off was necessary because of a California Public Utilities Commission ruling that forced an accounting change. As a result, Edison had to recompute its debt to reflect profits earned after the industry was deregulated in the mid-1990s.

``Today's financial charge, painful as it is for the company, only recognizes the well-known reality of SCE's large, unreimbursed costs of serving its customers. What is important now, however, is not so much compliance with accounting rules but whether Edison ultimately has a path to recover its costs,'' company chairman John Bryson said in a statement.

Absent the charge, Edison's fourth-quarter loss would have been $28 million, or 28 cents a share.

For the full year, the energy company lost $1.943 billion, $5.84 a share, on revenues of $11.717 billion. In 1999, the company had net income of $623 million, $1.79 a share, on revenues of $9.696 billion.

Excluding the charge, 2000 net income would have been $578 million.

Edison's grim report came one day after PG&E Corp. posted a $4.1 billion fourth-quarter loss.

The complex fix the companies are in stems from a relatively simple fact. Wholesale energy costs have been rising faster than they can be passed on to consumers.

Edison, which serves 4.3 million customers in Central and Southern California, calls this its ``uncollected costs.''

The city of Los Angeles is served by the Department of Water and Power, and hasn't experienced the rolling blackouts or increased fees that Edison and PG&E customers have seen.

Tim Craver, Edison International's chief financial officer, said the loss could possibly be reversed via two methods.

That will happen if Edison prevails in a lawsuit against the PUC that seeks recovery of the uncollected costs.

Most pressing, and controversial, is a bailout plan put together by Democratic Governor Gray Davis. He negotiated a deal for the state to buy SCE transmission lines for $2.76 billion, an amount some lawmakers consider too generous.

The deal also call for the PUC to reverse several of its decisions - including the one resulting in the write-off - within 60 days.

If that happens, Craver said, the charge could then be reversed.

Edison would also have to use its generation assets to provide low-cost regulated consumer rates.

Company officials say the deal is preferable to bankruptcy.

For this to work, though, the bailout must pass intact and Edison executives expressed some confidence during a conference call with reporters that it will.

``We entered into it with the perception that would take place,'' Craver said.

Brian Youngberg, an energy analyst at Edward Jones, isn't so sure.

``There is a lot of sentiment in the Legislature not to approve it. Some legislators view it as too much of a bailout. It's not going to be the easy ratification of the play that (Edison) would prefer,'' he said.

Justin Craib-Cox, an analyst at Morningstar, said the bailout is good for Edison.

``They are going to be paying out roughly the same amount of cash that they are going to be getting back in. Most people at this point would look at the California operation as a wash,'' he said.

In an ironic twist Tuesday, energy wholesalers Dynegy Inc., Duke Energy Corp. and Enron Corp., players in the California market, posted healthy profit gains that beat Wall Street's expectations.

Carol Coale, an analyst with Prudential Securities Inc., said Enron's results were no surprise because of increased demand for power and gas in power-strapped California and across the country.

``Clearly the California energy crisis has raised the bar on those power and gas trading and marketing profits,'' she told The Associated Press. ``Opportunities have existed outside California as well.''

Meanwhile, Dynegy, a major power generator in California, said it was being ``unfairly and inaccurately'' accused of withholding power from the state's power market. It said sales there ``did not make a material contribution'' to first-quarter results.

California utility woes result from deregulation. When it happened, regulators reasoned that if customers could pick their supplier then power costs would come down. The new system was based on one in place in the United Kingdom.

Edison owns operations in the United Kingdom and is considering putting them up for sale now.

``Deregulation, if it's done correctly, can work,'' Youngberg said. ``The U.K. is actually seeing lower power prices right now, so Edison is suffering because they own plants there.''