There is "overwhelming" evidence that senior managers at Southern California Edison knew about a seven-year fraud at the Rosemead utility to collect millions of dollars in customer-funded incentives, according to a judge's decision released Monday by the California Public Utilities Commission.
The opinion, written by Administrative Law Judge Robert Barnett, makes official the $200-million cost to Edison that he outlined Thursday in an unusual oral preview of his conclusions. The decision required Edison to lose $160 million in performance bonuses and to pay a $40-million fine -- among the largest ever assessed by the commission.
The $160 million in bonuses would be returned to customers in some form, possibly through a rate reduction. The $40-million fine would be added to California's general fund.
"SCE's activity was deliberate, occurred over a seven-year period, cost the ratepayers $124.7 million, and without the intervention of a whistle-blower, might be continuing today," Barnett wrote.
The facts of the case, he said, warranted a substantially higher fine of $102 million in addition to the returned bonuses. But because of the utility's "excellent cooperation after the fraud and manipulation came to light," Barnett reduced the penalty to $40 million.
Edison spokesman Gil Alexander said late Monday that the company would comment today on Barnett's decision.
Edison publicly disclosed in 2004 that employees had manipulated customer satisfaction survey results -- an admission that came after an unidentified letter writer complained to senior executives, public officials and the PUC.
The utility, which later discovered that some safety data had been suppressed, offered to pay a $2.5-million fine and to return $49.4 million in performance incentives that were paid or applied for over seven years.
During courtroom-style hearings in late 2006, Edison sought to pin the blame for the fraud solely on lower-level managers and employees. Eleven people were fired and 46 disciplined in a crackdown an Edison attorney called the utility's "most extensive discipline effort" ever. But that discipline fell well short of senior managers, who Edison said were unaware of the fraud.
Barnett concluded otherwise.
"The evidence is overwhelming that senior management knew of the manipulation and falsification," the judge wrote. "For seven years . . . some senior management actively encouraged employees to manipulate survey data, and other senior management, who knew or should have known that the data was suspect, filed for and received" the rewards.
