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Sep 23, 2002

CONTACT: Doug Heller - 310-392-0522 x309

Federal Court Says Edison Bailout Illegal

Case Sent to Cal. Supreme Court; Group Expects Refunds
Los Angeles, CA -- Just five weeks after the California Supreme Court refused to hear a Foundation for Taxpayer and Consumer Rights (FTCR) lawsuit challenging the California Public Utilities Commission's (PUC) authority to order ratepayers to bail out the state's utilities for their deregulation losses, the U.S. 9th Circuit Court of Appeals has told the California Supreme Court to decide the issue. FTCR said the decision will lead to rate cuts and refunds.

In a major victory for beleaguered California consumers, the federal appeals court sided with the consumer organization TURN, which challenged as illegal under state law a bailout deal struck by the PUC and Edison weeks after the state legislature rejected the bailout. The 9th Circuit said that the California Constitution and the state deregulation law sponsored by Edison "appeared" to prohibit ratepayers from being forced to pay off the utility's deregulation debts. It further agreed that the PUC deal violated state public open government laws. However, following federal procedures, the 9th Circuit asked the California Supreme Court to take the case and decide the state law issues. But the court said: "If the Supreme Court of California declines certification, we will resolve the issues according to our perception of state law"

Rate Cuts and Refunds Required for Edison Customers

FTCR, which successfully defeated Edison's campaign for a legislative ballot, sued the PUC in the California Supreme Court on April 11, raising the same issues addressed in the TURN case. However, on August 15, the California Supreme Court declined without comment to hear the case at the time. FTCR said today's decision would require Edison to cut its current rates and to refund excess charges it has collected under the bailout deal. Today's decision also means that the PUC has no authority to propose a similar ratepayer bailout for bankrupt PG&E.

"The Ninth Circuit's analysis confirms that that state PUC has no authority to rewrite state law and make Edison and PG&E ratepayers pay off more than $10 billion in alleged losses of the greedy companies that got us into this debacle," said Harvey Rosenfield of FTCR. "We are confident the California Supreme Court will read California law as the Ninth Circuit has done and come to the same conclusion. The utilities, their parent companies, their stockholders and their vendors reaped the rewards of deregulation, and must bear the losses."


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