Supreme Court Upholds High Rates

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Aug. 22, 2003 Share this on FacebookTweet thisEmail this to a friend

The California Supreme Court has ruled that the California Public Utilities Commission did not violate state law when it raised electric rates pursuant to a settlement agreement with Southern California Edison.

The court rejected arguments by CMTA and others that the secretly-negotiated CPUC-Edison settlement violates the Bagley-Keene Open Meeting Act and other provisions of existing law.

In an amicus brief filed earlier this year, CMTA argued that the CPUC does not have the authority to enter into the agreement in light of provisions of AB 1890, the landmark electric restructuring bill signed into law in 1996.

In 1996, pursuant to AB 1890, the rates of electric utilities were frozen "until the earlier of March 31, 2002, or the date on which the Commission-authorized costs for utility generation-related assets and obligations have been fully recovered." AB 1890 prohibits a utility from recovering costs incurred during the rate freeze period after the rate freeze ends.

The settlement agreement upheld by the court, on the other hand permits Edison to recover power procurement costs incurred during the rate freeze period, after the end of the rate freeze.

The court also ignored provisions of AB 1890 which place utilities at risk for costs of their generation-related assets and power-procurement costs that were not recovered during the rate freeze period, thus allowing Edison to keep revenues collected above its power procurement costs rather than refund those overcollections to consumers.

The ruling is certainly bad news for Edison’s industrial customers who have borne the brunt of the utility's rate increases since 2001. AB 1890 placed the risk of collecting transition costs on the utilities and the court should have recognized that. Their misreading of the law is a costly mistake that customers – and industrial customers in particular – are going to have to continue to pay for.
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