Court Halts Southern California Edison Rescue

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Energy Daily

Throwing a wrench in state plans to rescue financially ailing Southern California Edison, an appeals court Tuesday gave consumer groups a reason to cheer by temporarily staying an agreement between the utility and state regulators, sending it back before a U.S. District Court judge.

Lawyers for The Utility Reform Network (TURN) asked the 9th U.S. Circuit Court of Appeals for the stay last Friday. The matter now will be sent back to the courtroom of Judge Ronald Lew, who approved the settlement as a resolution of Southern California Edison‘s (SCE) lawsuit against the state for failing to allow the utility to recover more than $3 billion in undercollected power costs.

But consumer groups charged the “secret” deal violated their due process rights and asked for a chance to air their grievances against the deal, which was reached without their involvement.

“This order confirms that there are substantial questions about the legality of what the [California Public Utilities Commission] has done,” said Nettie Hoge, executive director of TURN. “The appellate court wants to see ratepayers protected while those questions are answered.”

“Gov. [Gray] Davis and the [C]PUC‘s secret deal-making with Edison violated the California Constitution and numerous state laws and denied ratepayers any semblance of due process,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights.

Stephen Frank, president, chairman and chief executive officer of SCE, said, “TURN’s motion for a stay simply has no merit and we will continue to vigorously oppose it.” He added the company was “confident” the agreement would be upheld.

At stake is a multi-billion deal that would allow SCE to pay off its creditors using a windfall from high retail rates. In a recent conference call with analysts, the company said it was earning approximately $200 million to $300 million extra each month since power prices have fallen well below previous levels.

Earlier this year, the CPUC instituted a 40 percent retail rate hike, and the commission offered to keep the hike in place until SCE recovered its costs. In turn, the utility must forego approximately $1.2 billion worth of dividend payment to shareholders.

The agreement is significant in that it avoided the thorny problems associated with getting state legislative approval, which tripped up an earlier settlement agreement between SCE and the state. Judge Lew approved the deal three days after it was filed.

In addition, SCE was able to get a plan in place restoring its financial health without resorting to bankruptcy, as its fellow utility, Pacific Gas and Electric Co., did.

Consumer groups, however, said they were worried ratepayers would not benefit from the recent fall in power prices.

“We are concerned that if Edison takes advantage of its settlement with the CPUC to repair its credit-rating, there won’t be any money left for any ratepayer refunds if and when the appellate court throws out the settlement,” added Hoge. “Today’s order protects ratepayers from that risk.”

The CPUC, meanwhile, downplayed the importance of the ruling.

“We think the court didn’t really decide anything on the merits of the stay or the merits of the case…they just remanded the matter back to Judge Lew,” said Terrie Prosper, spokesperson for the CPUC. “We’re still confident the settlement is the right thing for consumers.”

TURN has already stated that it will ask for a further stay from the appeals court if it “is not satisfied with the district court’s order.”

Lew has until November 13 to respond to the appeals court. TURN said it will seek a further stay from Judge Lew in the next two weeks to get time to argue against the deal.

Consumer Watchdog
Consumer Watchdog
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