3. Authority to Borrow Short-Term

Edison's current authority to borrow money for periods of less than 12 months, at any one time, is a complicated calculation of the amount allowable under § 823(c)³ plus a specific lump-sum allowed by the Commission in a prior decision.

The regulated utilities are otherwise limited in authority to issue short-term so that the total amount outstanding cannot exceed 5% of the other outstanding securities. The Commission can and does grant authority to allow Edison (and other utilities) to exceed that limitation. See § 823(c), below:

823. (a) No public utility shall, without the consent of the commission, apply any part of the issue of any stock or stock certificate or other evidence of interest or ownership, or bond, note, or other evidence of indebtedness, or any proceeds thereof, to any purpose not specified in the commission's order, or to any purpose specified in the order in excess of the amount authorized for such purpose, or issue or dispose thereof on any terms less favorable than those specified in the order, or a modification thereof.

(b) A public utility may issue notes, for proper purposes and not in violation of any provision of law, payable at periods of not more than 12 months after the date of issuance of the notes without the consent of the commission.

(c) Notwithstanding the provisions of subdivision (b), no public utility as defined in Section 201(e) of the Federal Power Act (49 Stat. 847, 16 U.S.C. 824) shall, without the consent of the commission, issue notes payable at periods of not more than 12 months after the date of issuance of the notes if such notes and all other notes payable at periods of not more than 12 months after the date of issuance of such notes on which such public utility is primarily or secondarily liable would exceed in aggregate amount 5 percent of the par value of the other securities then outstanding. In the case of securities having no par value, the par value for the purposes of this subsection shall be the fair market value as of the date of issue.

(d) No note payable at a period of not more than 12 months after the date of issuance of such note shall, in whole or in part, be refunded by any issue of stocks or stock certificates or other evidence of interest or ownership, or of bonds, notes of any term or character, or any other evidence of indebtedness, without the consent of the commission. (Emphasis added.)

Edison was most recently authorized by D.05-06-020 to issue short-term notes, through June 30, 2010, in an aggregate principal amount, not to exceed at that time, of $ 776,301,000, of which $441,288,502 was a lump-sum in excess of the limit otherwise allowed by § 823(c), i.e., $335,012,398. Based on the outstanding securities as of March 31, 2008, Edison is presently allowed to issue up to $458,088,398 (as authorized by applying § 823(c) to Edison's outstanding long-term securities) and the additional lump-sum of $441,288,502 authorized by D.05-06-020, for a total of $899,376,900. This exact amount continues to vary monthly as Edison's total securities varies.

Edison requests an increase in its short-term borrowing authorization primarily because of its large capital spending program that is anticipated over the next several years. Edison states that it intends to invest approximately $19 billion over the next five years in replacing and improving aging infrastructure and other capital investments. Edison also states in its application that it will need to issue debt and equity securities to partially fund the capital expenditures. Edison indicates that while it expects to issue long-term securities to fund the borrowings, it needs to have flexibility to borrow significant amounts in the short-term market when market conditions make long-term financing unattractive or unavailable. When market conditions for long-term securities improve, the short-term borrowing would be reduced through the issuance of long-term securities. Similarly, debt maturities, opportunities to redeem or repurchase securities at low cost, changes in cash flows, or other unexpected events may make it necessary or desirable for Edison to increase its short-term borrowing temporarily to meet cash needs. Again, short-term borrowing would be reduced when practicable.

Edison also requests a simple lump-sum limitation to its authority and thus exempting it from the continually changing allowance of § 823(c).

Edison's authority is based upon its likely and authorized needs to use short-term debt and therefore the mechanical limitation of 5% of other securities is both irrelevant and unnecessarily complicated. A 5% limit would continually change whereas a fixed limit requires a specific Commission order to change the limit. The authority to borrow up to $2 billion granted in today's decision supersedes all prior authority pursuant to § 816 et seq., to issue short-term debt, as discussed below.

³ Unless otherwise noted, all code citations are to the California Public Utilities Code.