Cal. Supreme Court Upholds $3.6 Billion Bailout of Southern California Edison

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Consumer Group Calls on Governor Davis to Stop Ratepayer Bailout of Utility’s Deregulation Disaster

Santa Monica, CA– The California Supreme Court today unanimously upheld a secret deal by the Davis Administration to force consumers to pay off $3.6 billion in debts, or an average $850 per Edison ratepayer, incurred by Southern California Edison as a result of the disastrous deregulation law the company sponsored in 1996.

Reaching exactly the opposite conclusion of the Ninth Circuit US Court of Appeals, the state Supreme Court agreed with Edison and the California Public Utilities Commission (PUC) that emergency laws passed during the crisis in 2001 superseded the 1996 deregulation law, which gave utilities billions in extra revenues but required the companies to bear the risks of the marketplace. The Court also said the deal, arrived at secretly without a public hearing, did not violate state open government rules.

“This is a $3 billion travesty of justice for the state’s consumers,” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights (FTCR), which sponsored an unsuccessful ballot initiative to block parts of the deregulation law in 1998 and successfully defeated a legislative attempt to bail out Edison in 2001. “According to the state Supreme Court, utilities are allowed to reap the benefits of deregulation — billions of dollars in profits — but when deregulation collapsed, the consumers must bear its burdens. This is ‘heads the utilities win, tails consumers lose’.”

Group Calls on Governor Davis to Intervene

Noting that all five of the Commissioners on the PUC are appointees of Governor Davis, FTCR called on Davis to intervene to protect ratepayers. The PUC could withdraw its bailout settlement with Edison, but was not likely to unless Governor Davis made it a priority, the group said. Davis, who recently expressed contrition for his handling of the energy crisis, should tell PUC Commissioners to relieve average Californians of this additional cost of deregulation’s failure and require utility companies to take responsibility for deregulation and its costs.

“Governor Davis should intervene to protect Edison customers from this bad decision by pressing his appointees to rescind the bailout deal,” said FTCR’s senior consumer advocate Douglas Heller. “If Davis does not act to block this bailout, he will be taking three billion dollars out of ratepayers’ pockets; and if he supports the decision, it would mark a terrible betrayal of California consumers by the Governor.”

Deregulation Bounty for Utilities, $70 Billion Blow to Consumers

As a result of the deregulation disaster, consumers first paid more than $20 billion to Edison, PG&E and San Diego Gas & Electric to subsidize the utilities’ transition to deregulation. Taxpayers then funded more than $10 billion in overpriced energy purchases to stave off power company-initiated blackouts and ratepayers’ electricity bills were also increased by approximately 30%. Additionally, Governor Davis signed long-term energy contracts that locked ratepayers into a decade of high priced power.

With today’s Court decision, FTCR estimates that the total consumer cost for California’s foray into deregulation will top $70 billion more than the reasonable price for electricity.

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Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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