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Power Markets Week

Southern California Edison‘s settlement with the state Public Utilities Commission is not facing a smooth road to acceptance by everyone in California, with at least two consumer groups planning to appeal court approval of the package that aims to restore the utility to financial health by 2003.

The Utility Reform Network, a San Francisco-based watchdog group, and the Foundation for Taxpayer & Consumer Rights (FTCR) said the deal violates state law, partly because the PUC negotiated secretly on matters that must be decided after public hearings and opportunity for comment.

U.S. District Court Judge Ronald Lew accepted the settlement Oct. 5, which concluded SoCal Ed’s lawsuit filed almost a year ago against the PUC, claiming the regulators improperly refused to raise rates after power prices escalated beyond the revenue levels the utility could recover from customers. TURN was a party to the case.

FTCR said last week that because the settlement was negotiated behind closed doors, it violates state laws requiring commission decisions on ratemaking matters to be conducted through public hearings with opportunity for consumer groups to intervene. And by making the agreement, FTCR said, the PUC unconstitutionally usurped the authority of the Legislature, which had refused to approve a SoCal Ed rescue package.

The deal with the PUC transfers regulatory authority over SoCal Ed to the federal court through 2005, FTCR complained, arguing the transfer violates the state constitution. ”The PUC cannot ignore state law and hand over its regulatory responsibilities to a federal court,” said FTCR President Harvey Rosenfeld. ”Nor may a federal court judge usurp state law in this way.”

Meanwhile, small power suppliers to SoCal Ed are worried about what the court-accepted settlement means for the deal they made with the utility in June. At that time, the suppliers, qualifying facilities, negotiated a package that would have SoCal Ed pay them 5.37 cents/kWh for power and pay what it owes them for past power purchases. The deal had been tied to passage of the rescue bill by the Legislature.

Utility Senior Vice President John Fielder said last week that the company would sit down this week with QFs and decide when the five-year, 5.37-cent payment arrangement would begin. According to the June settlement, it was to start as soon as the legislation passed.

Jan Smutny-Jones, executive director of Independent Energy Producers, also speaking at IEP’s annual meeting in Lake Tahoe, said he would be participating in the talks and said the state date for payments would be the only item on the agenda. He argued payments should start immediately.

But Jerry Bloom, a partner with White and Case, who will be negotiating on behalf of the QFs and who represented them in the June settlement, said there are several other issues that need to be cleared up as well.

”What we need is finality on all the issues…that have been open for the past year,” Bloom said -issues revolving around just how much SoCal Ed owes some QFs and how to calculate short-run avoided costs for QFs that did not sign onto the June settlement.
Bloom accused the PUC of ”colluding” with SoCal Ed to the detriment of QFs. The PUC settlement has SoCal Ed agreeing to pay its bills in part by using the surplus derived from revenues it expects to exceed costs. Reducing QF payments will help accomplish this plan, he said.

Larger generators, meanwhile, appeared still willing to work with the utility to see how debt payments will be worked out. Details remained unresolved, but Reliant Energy, for example, said early on that ”our hope is that SCE’s commitment to pursue the fair and equitable resolution of the claims of its creditors is legitimate and will avert the need of creditors to pursue other remedies.”

Consumer Watchdog
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