Federal judge mulls Edison-PUC settlement as parties weigh in

By Paul Chavez, Associated Press Writer
Friday October 05, 2001



LOS ANGELES — Lawyers for Southern California Edison and the state Public Utilities Commission filed papers Thursday urging a federal judge to approve a settlement designed to keep the utility out of bankruptcy. 

U.S. District Judge Ronald S.W. Lew was expected to rule on the matter Friday. 

The agreement lets Edison pay off an estimated $3.3 billion of its more than $6 billion debt by forcing its customers to continue paying higher rates imposed last May for at least two years. It also requires Edison’s shareholders to forego $1.2 billion worth of dividends over three years. 

The deal, secretly negotiated over 10 days and announced Tuesday, would settle a lawsuit filed by Edison last November and is designed to keep the Rosemead-based utility from following Pacific Gas and Electric, the state’s largest utility, into bankruptcy. 

In separate filings to Lew, both parties responded to criticisms of the settlement filed Wednesday by The Utilities Reform Network, a San Francisco-based consumer advocacy group, and the Los Angeles Office of the County Counsel, which were both allowed to intervene in the case. 

Lew scheduled a hearing Friday morning on the issue, after which he is expected to rule. 

Shareholder-owned utilities in the state started amassing debt last year because they were unable to pass along skyrocketing wholesale power costs to ratepayers. The state’s 1996 deregulation law imposed a price cap on energy rates paid by customers, which was the focal point of Edison’s lawsuit against the PUC. 

Lawyers for TURN and Los Angeles County, which is one of Edison’s largest customers, complained in their Wednesday filings that Lew had given them only 24 hours to offer comments on the proposed settlement. 

TURN, in its filing, also said the PUC had violated state law by secretly deciding regulatory issues without public hearings. 

The PUC, in its reply, said it was “sensitive” to the objection, but noted that state law allowed the agency to consider litigation in closed session. 

If the proceedings had been public, Edison likely would have been forced into bankruptcy and the PUC and its attorneys would not have had frank discussions about the settlement, court documents said. 

Reliant Energy Services and Mirant Corporation, which are owed more than $260 million by Edison for power purchases, also filed a joint objection Wednesday to the proposed settlement. 

The wholesale power providers said the agreement “is utterly silent about the mechanics of payment to creditors” and asked the court for more time to study the proposed settlement to determine its effects. 

The filing also stated that Edison has not made any payments to either Reliant or Mirant in nine months. 

TURN, in its objection to the settlement, said approval would make the court the “ultimate regulator,” deciding retail utility rates for the next few years. 

Edison responded by saying TURN itself was trying to have the court assume the role of “super-regulator” by urging Lew to reject the PUC’s determination that the settlement was in the public interest. 

The proposed settlement also was receiving mixed reviews outside of court filings. 

“If this is agreed to, the power crisis has just entered another phase,” said Douglas Heller, a consumer advocate for the Santa Monica-based Foundation for Taxpayer and Consumer Rights. “This is the pay-now-ask-no-questions-later phase of the power crisis in which the government is effectively giving up its rights to challenge Edison’s unrelenting demands for more money.” 

The proposed settlement would be beneficial for the state’s economy if it keeps Edison out of bankruptcy, but it could end up hurting ratepayers, said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp. 

“Both residential and business ratepayers have seen a huge spike in their energy costs,” Kyser said. “The business community already has been saddled with increased costs of doing business as we move into a recession.” 

Kyser warned that natural gas prices and supply still need to be watched since it is the fuel of choice for power generators. 

Assemblyman Fred Keeley, D-Boulder Creek, said the proposed settlement had several shortcomings, but “the fundamental virtue is that it avoids a bankruptcy, which I think would be awful for consumers.”