Metropolitan News-Enterprise


Friday, August 22, 2003


Page 3


Supreme Court Says PUC Lawfully Settled Edison Power Rate Suit


From Staff and Wire Service Reports


A federal court settlement between Southern California Edison and state regulators that raised electricity rates for millions of California consumers by as much as 40 percent during the state’s energy crisis did not violate state law, the state Supreme Court said yesterday.

Responding to three questions certified to it by the Ninth U.S. Circuit Court of Appeals, which is reviewing the stipulated federal court judgment, the court said the Public Utilities Commission acted with its powers in reaching the settlement and did not violate state open meeting laws. The judgment did not violate a provision of the Public Utilities Code requiring public hearings and findings before electric rates are altered, the court’s six-justice majority said in an opinion by Justice Kathryn M. Werdegar.

Watchdog groups complained that the ruling means consumers are left footing the bill for California’s energy mess, and Justice Marvin Baxter dissented, arguing that the PUC “contravened the Bagley-Keene Open Meeting Act,” misusing the act’s exception permitting closed meetings to “confer with, or receive advice from,...counsel” about pending litigation when it approved the settlement in closed session.

An aide to Gov. Gray Davis, meanwhile, said the decision was an endorsement of the tough steps Davis took to resolve the 2000-2001 power crisis. The 2001 deal was reached after private meetings between the PUC, governor’s staff and utility representatives.

“By stabilizing Edison, we were able to save the utility and now give the consumers the rate cuts they deserve,” said Steve Maviglio, spokesman for the governor, whose handling of the energy crisis has become a big issue in the state’s recall election.

The settlement allowed SoCal Edison to collect at least $3 billion in extra customer utility fees and pay off its debts to the point that the PUC earlier this summer cut electricity rates for SoCal Edison customers by 3 percent.

“It’s another critical step in restoring the financial health of the utilities and will help pave the way for additional cuts in rates in the months to come,” Maviglio said. “The ruling helps us ensure reliability and stability.”

But that misses the point that consumers should have been spared, said Bob Finkelstein, a lawyer for the Utility Reform Network, which challenged the rate hike in court.

“What the Supreme Court has said here is the utility companies get to reap all the rewards of deregulation, but when deregulation goes into the toilet, the utilities still win,” said Harvey Rosenfeld of Consumer Advocates, another consumer organization.

Edison and PG&E amassed billions of dollars in debts when wholesale electricity rates in California soared beyond the frozen retail rates that utilities could recover from customers in 2000 and 2001 under the state’s deregulation rules.

The utilities eventually sued the PUC, arguing that federal energy rules demand they get compensated for the true cost of the electricity they are selling.

The PUC agreed to settle with Edison in October 2001 to help the utility repay $3.6 billion in debt accumulated during the power crisis by allowing it to maintain a temporary rate increase for two more years. The PUC also allowed Pacific Gas & Electric Co. to collect a similar surcharge.

The deals allowed both utilities to generate billions in new revenues. PG&E has 4.6 million customers. Edison serves 4.3 million.

California officials have long said the reason wholesale rates soared in the state was manipulation by energy traders, such as now-bankrupt Enron, and wholesalers who withheld power to drive up prices.

The Federal Energy Regulatory Commission has agreed that the market was manipulated, though it is still considering how to deal with those it deems responsible.

Werdegar, joined by Justices Joyce L. Kennard, Janice Rogers Brown, and Carolos Moreno, Chief Justice Ronald M. George, and Sixth District Court of Appeal Presiding Justice Conrad L. Rushing, sitting on assignment in place of Justice Ming Chin, said the PUC had “strictly followed the procedure mandated in Government Code section 11126.3, subdivision (a)” in holding its closed meeting.

“To require reconvene in open session and publicly announce it was considering settling SCE’s federal litigation would subject PUC to the potential loss of the very negotiating equality that Government Code section 11126.3, subdivision (a) was designed to preserve,” the justice wrote. “Reading Government Code section 11126, subdivision (e)(1) in statutory context, therefore, we conclude it authorized PUC not only to discuss, but also to conclude the settlement in closed session.”

Werdegar said Public Utilities Code Sec. 454(a), which provides that “no public utility shall change any rate or so alter any classification, contract, practice, or rule as to result in any new rate, except upon a showing before the commission and a finding by the commission that the new rate is justified,” does not “require PUC to hold a ‘public hearing’ before allowing a change in rates.” She added that the settlement did not change rates, but rather kept in place an existing rate.

Baxter dissented from that portion of the court’s ruling as well, declaring:

“[T]he settlement between the PUC and SCE constituted their agreement to a ‘change’ in SCE’s rates. The settlement either froze rates or extended a freeze already in effect. It eliminated, for both past and future purposes, prior restrictions on SCE’s use of the 2001 surcharges. It cancelled ratepayers’ rights, both past and future, to refunds of surcharge amounts overcollected by SCE under the terms and conditions originally applicable to these rates. It thus afforded SCE the opportunity to recover from its ratepayers some $6.355 billion in liabilities already accrued by SCE, with approximately $3.3 billion of that amount to appear on their future electricity bills. Insofar as the PUC accepted this ‘change’ without resort to the requirements of Public Utilities Code section 454(a), it acted illegally.”

The case is Southern California Edison Co. v. Peevey (The Utility Reform Network), 03 S.O.S. 4591.


Copyright 2003, Metropolitan News Company