CPUC Proposes $200M Rebuff to Edison

By Published On: October 5, 2007

A California Public Utilities Commission proposed decision could cost Southern California Edison shareholders twice what the state originally planned and 17 times as much as Edison originally offered in restitution for falsifying data in order to receive ratepayer awards. “Edison had no right to take consumers’ money when the performance hadn’t really happened,” said Mindy Spatt, The Utility Reform Network spokesperson. Edison vowed to appeal the decision. “Many of the findings are not supported by the evidence of wrongdoing the utility uncovered and self-reported to regulators, nor consistent with the fair application of regulatory penalties,” the utility stated. If the state prevails, the refund would consist of $160 million, plus $40 million in fines. Regulators used to have a program–performance based rates–that allowed utilities to receive financial payments if they met certain customer satisfaction results. Edison admitted that its staff falsified customer satisfaction surveys in order for the utility to receive $28 million in performance-based ratemaking compensation from 1997 to 1999. Another $30 million in awards was pending from 2000-03, when the fraud came to light, according to Edison. The incentive program for the utility ceased in 2003. In 2004, Edison offered to pay a restitution of $12 million, later upping it to $14.4 million. In June 2006, the state was toying with a $100 million fine for the transgression. “Obviously when the administrative law judge heard evidence in the case, the fines and refunds kept increasing,” Spatt said in regards to the doubling of the earlier estimate. The awards program was established to get away from what was then considered commission “command and control.” Performance based plans allowed utilities leeway to make their own decisions. If their business acumen was correct and they garnered customer satisfaction, they were rewarded. The commission, however, did establish benchmarks to gauge effectiveness. According to commission documents, Edison senior management was tipped off to employee data manipulation in 2003. An anonymous letter alleged that management was complicit by suggesting that the data gatherers use “friendly” contacts. Thus, the surveys to meet or exceed customer satisfaction thresholds created by the state would appear more favorable than random contacts. In an internal investigation, the utility found two supervisors and nine planners “engaged in misconduct,” according to the commission. Because the proposed decision is on an adjudicatory track at the commission, it would become law in 30 days without an official decision, explained Spatt. An appeal, or an intervention by a commissioner would put it on regulators’ formal agenda for discussion.

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