Consumer Groups Demand Investigation of Secret Deal Between Edison and PUC
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NEWS RELEASE
Oct 31, 2001


CONTACT: Doug Heller - 310-392-0522 x309

Consumer Groups Demand Investigation of Secret Deal Between Edison and PUC

With 9th Circuit Stay, AG Should Get Involved
Read consumer groups' letter to Attorney General Lockyer

California's leading consumer groups called on Attorney General Bill Lockyer to investigate legal and constitutional issues related to the recent bailout settlement signed by Southern California Edison and the California Public Utilities Commission (PUC), in a letter sent yesterday. The groups -- Consumers Union, TURN and FTCR -- are "deeply disturbed" that the Attorney General initially acceded to the agreement and are calling on him to challenge it. On Tuesday, a Federal Appeals Court granted a temporary stay of the bailout pending further hearings at the U.S. District Court. Consumer groups argue the decision by the Court demonstrates that the secret bailout deal deserves greater consideration than the Attorney General originally granted the case.

"The settlement violates state laws requiring PUC decisions on ratemaking matters to be conducted through public hearings. The settlement violates state laws that protect ratepayers, and substitutes secret negotiations for a decision of the legislative branch, which, as you know, has refused to approve a bailout," the groups wrote in the letter sent to Mr. Lockyer.

Absent action by the Attorney General to protect the public, the groups fear that "secret settlements" could become the modus operandi for regulated entities seeking to avoid the laws and procedures of the state.

"If this back room deal is allowed to slip by, the future is clear. Any special interest or person can file a law suit against a state agency seeking private gain through illegal procedures," the consumer groups wrote.

The bailout (which will cost consumers between $3.3 and $4.9 billion) was engineered by Edison through settlement of a federal suit the company had filed against the PUC. There was no public hearing on the merits of the settlement and it violates a variety of state laws, regulatory procedures and the California Constitution, according the consumer groups..

William Ahern of Consumers Union, Nettie Hoge of TURN and Douglas Heller of FTCR signed the letter, which is reproduced below.
###

October 30, 2001

Honorable Bill Lockyer
California Attorney General
1300 I Street
Sacramento, CA 95814

Re: Edison-PUC Bailout Settlement

Dear Attorney General Lockyer:

We are deeply disturbed to learn that you have found "no legal basis for objection or opposition" to the Edison bailout deal secretly negotiated between the California Public Utilities Commission and Southern California Edison. We are writing to ask that you reconsider your initial conclusion and determine the best legal approach to represent the public interest in the unlawful transfer of $3.3 billion from California ratepayers. We believe that a full investigation into this matter, by your department, is necessary.

This "settlement" violates numerous procedural and substantive requirements of state law. It was negotiated in secret by the PUC, in violation of state laws requiring PUC decisions on ratemaking matters to be conducted through public hearings, with due notice, creation of a record, the opportunity for consumer groups to intervene and the public to appear and a decision based on facts and law contained in the final record. The settlement violates state laws that protect ratepayers, and substitutes secret negotiations for a decision of the legislative branch, which, as you know, has refused to approve a bailout. Further, the PUC deal transfers regulatory authority over Edison to the federal court for a period of time shorter than the Governor's bailout but equally in violation of the state Constitution, which requires the PUC to regulate rates in a public process. Clearly, the PUC sat down and made a deal with the devil to protect PUC authority over time by selling out California consumers, homeowners, renters, government agencies and business now.

If this back room deal is allowed to slip by, the future is clear. Any special interest or person can file a lawsuit against a state agency seeking private gain through illegal procedures. The state agency then engages in secret "settlement" negotiations that are ratified in a closed executive session. The "settlement" requires the state agency to engage in ultra vires acts and is immediately ratified by court order. The agency then claims it is bound by contract and by court order and must act accordingly, even though specific state law and due process is flagrantly violated. We predict that, as in this case, some private parties will seek public subsidies and other benefits through this private and illegal means of making public policy unless you act strongly and publicly.

As the top law enforcement officer in this state, it is incumbent upon you to do the work necessary to oppose a lawsuit settlement that so broadly violates the substantive and due process requirements of California and federal law. The People of California have the right to expect that their elected Attorney General will move expeditiously to defend the laws of the state and to represent their interests, interests deliberately excluded by the arrangement made by the PUC.

We expect you to reconsider your apparent assent to this agreement and move to vigorously investigate and challenge this unlawful settlement.

Yours,

William Ahern
Policy Analyst, Consumers Union

Nettie Hoge
The Utility Reform Network

Douglas Heller
Foundation for Taxpayer and Consumer Rights






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