The Associated Press

A federal judge has thrown out a lawsuit filed against the state’s Public Utilities Commission by California’s largest utility, Pacific Gas and Electric Co., that sought $10 billion from California ratepayers.

U.S. District Court Judge Ronald S.W. Lew dismissed the suit Wednesday, saying “PG&E‘s claims are not yet ripe for review.”

PG&E had asked the U.S. District Court in Los Angeles to overrule PUC decisions that the utility was not entitled to the money, which the utility spent buying electricity on the increasingly expensive wholesale market.

“This is a win for California ratepayers,” said Steve Maviglio, spokesman for Gov. Gray Davis. “PG&E was banking on winning this case and using it as one of their excuses for not negotiating with the governor. It appears at least for now they failed.”

Lew said in his ruling that “PG&E may refile its action once the CPUC interim orders it challenges become final decisions.”

The city of San Francisco, the state of California and The Utility Reform Network, a San Francisco-based consumer watchdog group, had intervened in the case opposing the utility’s request.

“Upon initial review, it appears the court rejected the arguments the California Public Utilities Commission made to dismiss our federal lawsuit, except on the issue of ‘ripeness,”‘ PG&E said in a written statement.

“The court determined that our lawsuit was premature because the CPUC had not yet finalized its various decisions on PG&E‘s request for recovery of its costs to purchase wholesale power,” the utility said.

“The court said that we may re-file the lawsuit once the CPUC decisions become final. Today’s action allows us to continue to pursue the merits of the case on a timely basis.”

California’s 1996 deregulation law froze electricity prices for customers of the state’s three investor-owned utilities. When prices rose to record levels over the past year, PG&E was unable to recoup the higher costs from its customers’ bills. It argued to the court that the rate freeze ended “no later than August 2000” when it claims it erased its debts as required by state law.

The undercollection, along with a failed deal to sell its transmission lines to the state, drove PG&E to file for federal Chapter 11 bankruptcy protection on April 6. Fellow utility Southern California Edison Co. teeters on the brink of bankruptcy, and San Diego Gas and Electric Co. faces similar financial troubles.

“I’m happy that it has vindicated the action of the Public Utilities Commission,” said Commissioner Jeff Brown. “We will be examining the issue of stranded costs of course in the very near future, and we’ll be voting on this matter sometime this month.”

But Debra Bowen, D-Marina Del Rey and chairwoman of the Senate Energy Committee, said since the judge dismissed the case on procedural grounds rather than merits, PG&E only hast to wait for PUC action before it can return to court. If Lew had based dismissed it until the bankruptcy hearings wind up, it could have stalled the utility for years.

SoCal Edison had filed a similar case in federal court, which is suspended while executives finalize a deal with the state, said Edison spokeswoman Clara Potes-Fellow.

Edison would drop that case as part of the rescue plan negotiated by Gov. Gray Davis, which also includes the state purchasing the utility’s transmission lines for $2.7 billion.

Bowen, an attorney, said the case might change the negotiation stance with SoCal Edison, mainly because Edison had been counting on winning this suit.

Also, “It may increase the pressure on the marketers and the generators, too. As long as you think you might win, why settle for less than 100 cents on the dollar?” Bowen said.

“I think PG&E is sort of playing every card it can pull out of its sleeve to try to get ratepayers to pay costs that are really not ours to pay. This suit was just one example of that,” said Mindy Spatt, spokeswoman for The Utility Reform Network, a San Francisco-based consumer rights group.

“PG&E got the benefit of the rate freeze for three years and reaped $10-$11 billion in surcharges from ratepayers. The court’s decision today means it (also) has to bear the risks” of that rate freeze, said Harvey Rosenfield of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

PG&E now has to go back to the PUC, which already has ruled that the rate freeze should continue.

The utility and state power regulators have been engaged in a power play since PG&E filed for Chapter 11. One of the utility’s first post-bankruptcy actions was to ask U.S. Bankruptcy Judge Dennis Montali for a temporary restraining order against the PUC to avoid complying with a commission-ordered accounting change that would keep the rate freeze in place.

The PUC later gave the utility extra time to respond. PUC President Loretta Lynch said the commission has filed a motion with the bankruptcy court “to dismiss (PG&E‘s) adversarial position against the PUC.” The PUC does not lose its authority to regulate the utility simply because PG&E is in bankruptcy court, Lynch said.

“That’s like saying that when a company chooses to go into reorganization, that company does not have to abide by health and safety laws, or minimum wage laws,” Lynch said.