If you were to shine a bright light on the fate of

Southern California Edison

, you'd see dim prospects for the Golden State's second-largest electric utility.

That's not what this

Edison International

(EIX) - Get Report

subsidiary wants its creditors and shareholders to believe. In recent conference calls with bondholders and analysts, Southern California Edison appears to be painting a much brighter picture than its creditors -- especially some generators -- of their ongoing negotiations to resolve outstanding bills.

Push and Pull

Under the radar, there's a major tug of war developing between Southern California Edison and some of its creditors that want to push it into bankruptcy.

According to Southern California Edison, the lines of communication with its banks and creditors are open and information is flowing. "We have been holding various conference calls with our bank group and also with the generator group and various individual calls with generators and banks," said Ted Craver, Southern California Edison's CFO, on a conference call Tuesday with Edison bondholders. "All of this is ensuring that we have the very best direct communication with our creditors."

But some of its largest creditors, generators that have sold power to the troubled utility, say Southern California Edison has made few overtures to resolve outstanding credits.

"Edison says they are in senior-level negotiations with generators about paying their bills. That is simply not true," says one source from a generator-creditor of Southern California Edison. "We've had one phone call with a tone that indicated they had no proposal or idea about how to meet their obligations."

In fact, Southern California Edison probably isn't anywhere close to resolving outstanding debts with generators. Craver admits that his company is focused on trying to craft a bailout package that would involve state support of bonds for Southern California Edison's back debt, a strategy the company first

outlined in an April agreement with California Gov. Gray Davis.

Government Intervention

"The legislative path remains our intense focus," Craver said on the recent conference call. "We are busy working with the governor and his staff. This is where we continue to put our primary effort."

However, that plan seems inconsistent with Southern California Edison's claim that it is willing to work with generators to develop a payment plan to settle billions in back power bills. Under the legislative plan, any funds provided or guaranteed by the state of California could not be used to pay generators, companies Davis once called price "gougers" and "pirates."

Davis' first attempt to get a plan through the Legislature came to an abrupt end two weeks ago, when the state Senate refused to vote on the plan before adjournment. At that time, State Sen. John Burton, a Democrat like Davis, called the plan "a pile of s---" and indicated the plan had only seven votes in the 40-member Senate.

Davis has vowed to continue his fight, calling the Legislature back for a special session beginning Oct. 9, but hopes for passing a plan seem slim.

"Who knows? He may fight to the bitter end," one adviser to Davis told the

San Francisco Chronicle

this week. "But I just don't see the votes -- ever -- for this." A recent poll shows 68% of California voters are opposed to a Southern California Edison bailout.

Other Outcomes

If a plan does pass, it won't resolve the money owed the generators. Any plan likely will exclude payments with state funds to out-of-state generators.

That appears to be behind recent, quiet action by Atlanta-based

Mirant

( MIR) and Houston-based

Reliant Energy

(REI) - Get Report

to build a coalition of Southern California Edison creditors to force the utility into bankruptcy. So far, other creditors have been reluctant to commit, hoping a solution still may emerge from California's legislative and regulatory morass. Three creditors are required to file a petition forcing Southern California Edison into involuntary bankruptcy.

Southern California Edison does get points for political savvy. Just when the city of Long Beach appeared about to jump on the involuntary bankruptcy bandwagon, giving Mirant and Reliant the third party they needed, Southern California Edison cut a deal with the city to pay its bills in full. But there's a big

if

: The deal is off if the Legislature isn't able to pass a bailout package by Dec. 31.

Even if a bailout plan is approved, bankruptcy is nearly guaranteed if it excludes payments for generators. "We'd have no choice but to protect ourselves," says a source at one major generator.

Why Southern California Edison is so concerned about bankruptcy is somewhat puzzling. The state's largest utility,

Pacific Gas & Electric

, a subsidiary of

PG&E

(PCG) - Get Report

, filed for bankruptcy earlier this year and already has filed a plan that pays all of its creditors in full. Most analysts believe a similar game plan would work for Southern California Edison.

Yet, Southern California Edison remains committed to a legislative solution, one that appears as dim and distant as ever. In the meantime, it continues to duck and cover, a game that some major creditors say is growing old.

It's also a game with a familiar ending: a likely trip to bankruptcy court.

Christopher S. Edmonds is president of Resource Dynamics, a private financial consulting firm based in Atlanta. At time of publication, Edmonds' firm was long Mirant, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to

Chris Edmonds.