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Edison facing severe penalty

The utility should pay $200 million, the judge in a fraud case says.

September 28, 2007|Elizabeth Douglass | Times Staff Writer

Southern California Edison got a $200-million jolt Thursday.

The Rosemead utility should lose $160 million in bonuses and pay a $40-million fine as punishment for rigging safety and customer satisfaction data to collect performance incentives, a judge at the California Public Utilities Commission said.

The $200-million tab outlined by Administrative Law Judge Robert Barnett during a public hearing was nearly four times what Edison had proposed and included what may be a record-high fine by the commission against an electric utility.

The performance incentives were paid by Edison customers through their electricity rates, and the $160 million would be returned to them -- probably through a rate reduction rather than a refund. The $40-million fine would be paid into the state's general fund.

"From a customer perspective, this is very good," said Mindy Spatt, spokeswoman for the Utility Reform Network, a San Francisco advocacy group involved in the case. "Customers want to see the commission standing up for them, and this is an example of that."

Edison, the state's second-largest electric utility, had representatives at the hearing when Barnett disclosed the outlines of his decision. Utility spokesman Gil Alexander declined to comment because a written version of the ruling wasn't available.

PUC spokeswoman Terrie Prosper also declined to discuss Barnett's decision, as did the attorney representing the commission's consumer protection and safety division, which conducted the fraud investigation.

Aaron Johnson, deputy director of the PUC's Division of Ratepayer Advocates, said a $40-million penalty "would be a huge fine for the commission.

"But until a decision is actually issued by the agency, there is no fine."

During Thursday's hearing, Barnett also suggested that the commission consider compensating the Edison whistle-blower or whistle-blowers who wrote letters to utility managers, regulators and public officials complaining about the fraud.

The letter writer or writers haven't been identified, but Barnett said the person or persons should be "substantially rewarded" and protected from retaliation by the utility.

Barnett presided over the lengthy case, and his decision, once formally issued, would be final 30 days later unless someone involved in the case appeals the matter to the five-member commission or a commissioner seeks further review.

Barnett told lawyers Thursday that he believed they should know "the essential parts of my decision" on the fraud investigation because they were gathered to schedule hearings for the next phase of the Edison probe. But he also hinted that there could be changes made to his conclusions.

"Theoretically, my decision goes out as written," Barnett said, according to a transcript. "In actuality, there are a lot of people who put their hands in the pot and try to stir it a little, and it's up to me to fight them off."

Barnett didn't say who might object to his decision. Commission President Michael R. Peevey is assigned to oversee the Edison case alongside Barnett.

Spatt of the Utility Reform Network said the judge's public statement was unusual because it came as Barnett's written decision was still being circulated inside the commission and hadn't been made public.

"I was really surprised," she said. "I think he's concerned that [his decision] will be watered down before it's made public."

In 2004, Edison admitted that workers in its service planning department were pressured to land the highest possible customer satisfaction survey results so that employees and the company as a whole could win customer-funded financial incentives.

Over a seven-year period that ended in 2003, utility employees erased or changed the phone numbers of unhappy customers to prevent outside surveyors from reaching them to gauge their satisfaction.

A subsequent investigation found that employees were also falsifying safety records to help the company earn performance bonuses from the public utilities commission.

Edison, a subsidiary of Edison International, has not denied the findings in the probes. But during nine days of courtroom-style hearings last November, Edison contended that the utility's costs should be limited to nearly $50 million in returned or forgone bonuses, plus a $2.5-million fine, because the company quickly and voluntarily reported the problems, fired 11 people and disciplined 46 others as part of what Edison attorney Charles Read called "the most extensive discipline effort in the company's history."


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