Edison Pays $145M for Fraud, Reaps $1.6B for Smart Meters

After two whistleblowers informed Southern California Edison officials that employees submitted false customer satisfaction surveys and employee health and safety reports, regulators slapped the utility with a $30 million fine. The California Public Utilities Commission also unanimously agreed at its September 18 meeting to require the utility to refund $80 million in performance incentive rewards it reaped for misleading reports submitted over a seven-year period to regulators. Commissioners also approved making the utility forego $35 million in hoped-for incentives paid for by ratepayers. Edison did not dispute the findings, and cooperated with the California Public Utilities Commission investigation. “The harm was substantial,” said CPUC president Mike Peevey. But, he also commended the utility’s efforts in remedying the wrong committed from 1997-2003. The unprecedented $30 million fine was $10 million less than the fine proposed by Peevey. “Edison agrees with the California Public Utilities Commission that the reporting inaccuracies the utility discovered, investigated and self-reported to regulators represented a very serious breach of SCE’s responsibility,” the utility stated. Commissioner Rachelle Chong, who authored the approved alternate decision, said, “We must be vigilant against abuse.” She added that the integrity of the commission processes and code must be protected. She noted integrity was especially critical in the area of incentive mechanisms, where utilities are rewarded for meeting or exceeding set performance goals--be it in the areas of customer satisfaction or worker safety reports. Chong noted how regulators are increasingly using carrots--incentive mechanisms--instead of sticks to induce desired responses from the investor-owned utilities. In several regulatory areas, like customer service, utilities are able to receive bonuses from ratepayers for excelling at what they are supposed to provide. The commission instituted the incentive process as an automatic mechanism to reward utility performance without having to go through long-term hearings. During the same meeting, for example, the regulators approved a long-term energy efficiency strategy that allows Pacific Gas & Electric, Edison, and San Diego Gas & Electric to reap millions of dollars if they meet or exceed energy savings targets (see story below). The Utility Reform Network welcomed the fine. It said Edison collected $160 million in profits and employee bonuses from ratepayers for claiming “superior customer service and safety performance.” What the commission took away with one hand it gave away with the other. Regulators enthusiastically agreed to allow Edison to recover in rates $1.63 billion for its advanced metering program. It plans to install 5.3 million of these devices, which are expected to decrease power usage in homes and small businesses when energy use is peaking, via what is known as demand response. Commissioner Dian Grueneich said expected power savings will help the state meet its greenhouse gas reduction goals as well. The overall savings from these meters is estimated to be between $9 million and $304 million. CPUC member John Bohn cautioned his colleagues on the projected energy savings. “We need to be a little careful relying on these numbers with squishy assumptions,” he said. With “smart meters,” utilities may charge ratepayers fluctuating energy rates, which reflect the cost of electricity during high, medium and low usage. The commission already allowed PG&E to collect $2.3 billion from ratepayers for its universal installation of smart meters. It also authorized SDG&E to collect $572 million for its advanced metering infrastructure.

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Edison Pays $145M for Fraud, Reaps $1.6B for Smart Meters

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