Sacramento Bee
A federal judge Monday denied Southern California Edison‘s request to quickly raise its rates by about 9 percent to cover the skyrocketing costs of wholesale power associated with deregulation.
U.S. District Judge Ronald S.W. Lew denied Edison‘s request for a preliminary injunction that would have forced the Public Utilities Commission to increase Edison‘s rates within seven days.
But Lew paved the way for Edison to go to trial quickly – probably along with Pacific Gas and Electric Co. – to seek higher rates to cover the more than $11 billion the two struggling utilities claim they owe generators for power purchases.
The judge dealt only with Edison on Monday, saying the Southern California utility firm’s request for a preliminary injunction was “wholly inappropriate.”
“It would ask this court to essentially divest the state of substantially all regulatory power over interstate rates,” Lew said.
Gov. Gray Davis, the Public Utilities Commission, consumer groups and California Attorney General Bill Lockyer hailed the ruling. They said it gives the governor, state lawmakers and the PUC more time to address the utilities’ debt problems.
“The fact that the court abstained today is good for ratepayers,” Lockyer, who was in court, said after the hearing. “But there is still lots and lots of further work that needs to be done.”
Ronald L. Olson, Edison‘s lawyer, said the ruling will allow Edison to get the issue to trial more quickly and expressed confidence in the utility’s case.
“We expect to recover our money just as we have proposed in our complaint,” Olson said. “The judge has not done anything to diminish our belief in our complaint.”
No trial date was set. But the judge agreed to Edison‘s request to return to court March 5 – two weeks earlier than had been planned – so that Edison and the PUC can discuss their progress on the lawsuit.
Consumer groups said Lew’s ruling proved their claim that the lawsuit shouldn’t force lawmakers to rush to bail out the utilities.
“Edison has been holding this lawsuit over the head of legislators, threatening the hammer would fall on Feb. 12,” said Harvey Rosenfield with the Foundation for Taxpayer and Consumer Rights. “But the hammer did not fall, and another utility bluff has been called.”
Edison and PG&E have claimed to be on the brink of bankruptcy because retail rates set by the PUC don’t cover the soaring costs of wholesale power triggered by deregulation.
The PUC claims that the utilities have overstated their losses and ignored the billions they made in the early years of deregulation, when state-frozen rates greatly exceeded power costs.
It also claims that the utilities could have paid less for power from other sources, and that makes further rate increases unnecessary.
Edison serves about 4.3 million customers in Central, coastal and Southern California. It sued the PUC in November to force a rate hike to help it recover past costs as well as current cost overruns.
After lawmakers authorized the state to spend up to $10 billion to buy power on behalf of the utilities, Edison amended its request to cover only those costs incurred before the Legislature’s action.
It asked the court on Monday for a 1-cent-per-kilowatt rate increase, spread over three years, to recoup about $2.5 billion in past costs.
In its underlying lawsuit, though, it is seeking nearly $4.5 billion.
PG&E, which serves 4.5 million customers in Northern and Central California, filed a similar suit against the PUC in Oakland. It is seeking more than $6.6 billion in costs.
On Jan. 29, the Oakland judge granted PG&E‘s request to transfer its lawsuit to the Los Angeles court so it could be combined with Edison‘s case.
But Lew, the judge hearing Edison‘s case in Los Angeles, said Monday that he was “very concerned” about the transfer.
Michael Strumwasser, lawyer for The Utility Reform Network, which opposed Edison in court Monday, said he expects the judge will allow PG&E to consolidate its case with Edison.
He said Lew’s statements indicate the judge was worried that PG&E was “forum shopping,” or seeking a judge it believed would be more favorable to it.
Lew was clearly concerned about what he called the “spin” that emerged after his Jan. 8 ruling denied the PUC‘s motion to dismiss the case and denied Edison‘s request for summary judgment in its favor.
“The plaintiff’s (Edison‘s) description of the ruling in its preliminary injunction papers is flatly wrong,” Lew said. “And plaintiff is advised to carefully circumscribe future descriptions both inside and outside of the courtroom.”
California entered its fifth week of Stage 3 power alerts Monday, but no blackouts were expected.
PUC attorney Harvey Morris said the regulatory agency plans to open hearings Thursday to examine the audits of Edison‘s finances.
He said those hearings, coupled with continuing negotiations between the utilities and state officials, have eliminated the urgent need for a rate increase.
Olson, Edison‘s lawyer, said the utility is “open” to proposals from lawmakers and the PUC. But he said the “bankruptcy danger for Edison looms as large as it did before the hearing. Every day increases the risk.”
Lockyer, the attorney general, said state policy-makers could solve Edison‘s debt problems more quickly than the courts.
“Edison would take three years (to work its way through the court),” he said. “We think it can be resolved in three weeks.”
Wall Street analysts said Monday’s decision alone would not move Edison closer to bankruptcy. In the stock market Monday, PG&E Corp. fell 50 cents, to $12.55, and Edison International slipped 57 cents, to $12.53.
Lockyer came to Los Angeles to ask the court to delay or deny Edison‘s preliminary injunction request so the governor and lawmakers would have more time to reach a political settlement.
The judge refused to allow his arguments but left open the possibility that the state could intervene in the case at a later date.
Lew said he knew “a lot of people are interested in this case.” At the end of Monday’s hearing, though, he warned the lawyers: “This is not a do-all court for all concerns.”
