FTCR Sues CPUC in California Supreme Court

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Asks High Court to Block Secret Proceedings, Illegal Rate Increases to Pay for Utility Bailouts

San Francisco, Ca. — Calling the state Public Utilities Commission (PUC) an “agency out-of-control,” a California citizen group today sued the PUC in the California Supreme Court. The extraordinary suit, brought on behalf of the state’s taxpayers and ratepayers, asks the high court to order the members and the staff of the PUC to obey the state constitution and laws which prohibit rate increases to pay off utilities’ deregulation debts and require the agency to conduct public hearings on rate increases.

Read the petition.

The suit — filed directly before the state Supreme Court because of the urgent and profound nature of the PUC‘s violation of state laws — was brought by The Foundation for Taxpayer and Consumer Rights, which has fought to protect the public against the deregulation debacle, the ensuing energy crisis and the proposed bailouts of Edison and PG&E in the Legislature.

At issue are rate increases that will cost residential and business ratepayers of PG&E and Edison an average of $1,150. The suit comes as the PUC prepares to order utility consumers to pay as much as $6.6 billion in excessive electricity rates to pay off Pacific Gas & Electric’s (PG&E) self-inflicted losses from deregulation. Just six months ago, the PUC entered into a similar $3.3 billion bailout deal with Southern California Edison, which has been appealed to the 9th Circuit.

The FTCR lawsuit points out that California law — both the deregulation law which was written by Edison and PG&E and laws passed last year at the height of the energy crisis — specifically forbid ratepayers from being forced to bear the utilities’ deregulation losses. The California Constitution forbids the PUC from unilaterally nullifying state laws. The PUC‘s actions, taken in secret, also violate state laws requiring public notice and public hearings before rates may be increased.

“What we have here is a renegade state agency, its appointed members and staff acting in secret, deliberately violating the California Constitution and state laws which protect consumers and taxpayers against unfair and illegal rate increases and which require due process,” said Harvey Rosenfield, president of the organization. “The PUC is out-of-control and must be forced to obey the law.”

“Tens of billions of dollars of taxpayers’ and ratepayers’ money is at stake here as a result of the complicated maneuverings of the PUC, but the legal issue is simple: does a state agency have to obey the state constitution and state law? The answer is that under our form of government, the Legislature makes the laws, and the Executive Branch — of which the PUC is a part — must obey and enforce those laws.”

Summary of PUC Actions Challenged by Suit

  • Bailouts Violate Deregulation Law. California’s 1996 deregulation law — drafted by the utilities — required ratepayers to pay over $20 billion in surcharges through March, 2002 to pay off the utilities’ pre-1996 debts. In exchange, it put a freeze on rates and specifically stated that ratepayers would not be responsible for covering any losses by the utilities during that period. Prior PUC decisions had enforced these rules. But when the Legislature refused to pass Gov. Davis’s Edison bailout legislation, the PUC approved the Edison bailout in violation of the law, and the PUC is preparing a similar bailout for PG&E.
  • Evading State Law Through Deals in Federal Court is Illegal. Article III, Sec. 3.5 of the California Constitution forbids state agencies from agreeing to a settlement in federal courts that violates California law. That is precisely what the PUC did in Edison, and is in the process of arranging for PG&E.
  • Secret Deals Violate California’s Public Process Laws. Public Utilities code §454 requires public notice and public hearings on rate increases. The PUC agreed to inappropriately maintain massive rate increases in secret sessions, without notifying the public and without holding hearings in which those who will pay for the bailout may participate. Evading this required process also prevented the public from appealing the PUC‘s unlawful actions to the state court system.

The lawsuit asks the Supreme Court to issue a writ of mandate declaring that the PUC lacks the authority to agree not to enforce state laws; declaring that the PUC cannot spend taxpayer money to propose or agree to a PG&E bankruptcy plan that violates state laws; and prohibiting the PUC from violating due process requirements applicable to electricity rate increases.


Click here to read the petition.

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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