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SAN FRANCISCO — A federal appeals court has referred a lawsuit over a $3.3 billion settlement between California and one of the state’s largest utilities to the state Supreme Court. 

Both sides called the decision by the 9th U.S. Circuit Court of Appeals a victory in the battle over whether the California Public Utilities Commission could use a court settlement to maintain record-high electricity rates for customers of Southern California Edison. 

The Utility Reform Network, a consumer advocacy group, sued to stop the agreement between the utility and its regulator, saying it was reached behind closed doors and violated the state’s deregulation laws that set a rate freeze for retail customers. 

Edison amassed about $6 billion in debts when wholesale electricity rates soared above the capped retail rates the utility charged its customers in 2000 and 2001. State lawmakers and Gov. Gray Davis debated for months on what role the state should play in Edison’s future, but legislation to bail out the utility failed. 

The PUC settled a federal suit with the utility in October to help Edison pay debts by maintaining for two more years a temporary rate increase approved a year earlier. 

The federal judges Monday upheld the PUC’s authority on several federal issues, which PUC and Edison officials said validated their arguments. 

“We are pleased that the court affirmed the settlement against all federal law challenges, and that the California Supreme Court will be deciding the important state law issues that it raises,” said Gary Cohen, general counsel for the PUC. “We are confident that the settlement ultimately will be upheld by the California Supreme Court.” 

But, the federal court said, there was “a serious question of whether the agreement between the commission and SoCal Edison violated state law, both in substance and in the procedure by which the commission agreed to it.” 

That means the state Supreme Court will have to choose whether to decide if the PUC violated the 1996 deregulation law and the Bagley-Keene Open Meeting Act, said Nettie Hoge, executive director of TURN. 

Edison officials said the state’s open meeting law allowed an exception to allow state agencies to meet privately with attorneys and that’s what the PUC was doing while crafting a settlement of a lawsuit.