Judge rules SoCal can pursue suit to recover power costs

Jan. 8, 2001
Financially troubled Southern California Edison Co. (SCE) was handed good news from a federal court in California concerning its quest to recover uncollected wholesale power costs from customers. Monday US District Court Judge Ronald Lew agreed a suit filed by SCE against the California Public Utility Commission should go forward. SCE sued the PUC in November seeking the right to recover the costs of purchased power from its customers.


Financially troubled Southern California Edison Co. (SCE) was handed good news from a federal court in California concerning its quest to recover uncollected wholesale power costs from customers.

Monday US District Court Judge Ronald Lew agreed a suit filed by SCE against the California Public Utility Commission should go forward. SCE sued the PUC in November seeking the right to recover the costs of purchased power from its customers.

The ruling from the bench is the first positive news the beleaguered utility, a unit of Edison International, has received in months. The company has incurred almost $5 billion in debt, resulting from the difference between what it pays for wholesale power costs and retail rates that are fixed under California's deregulation law. SCE has released dozens of advisories concerning a liquidity crunch that could result in rolling blackouts for customers.

The utility argued in its petition to the court the PUC violated federal law by requiring it to procure wholesale power from the state�s newly deregulated wholesale market, sell it without markup, and then be blocked from recovering the full cost.

The case will go to a full trial to determine if SCE�s purchases were prudent.

Investors reacted positively to the news sending the stock up $1.75 or 17% to close today at $12.06. The stock hit all time low of $6.25 a share last week when the PUC gave the utility a rate increase that averages about 9% for only 90 days. SCE had asked for a 30% increase in its filing in December.

Credit ratings agencies threatened late in December to lower SCE�s credit ratings and those of its parent Edison International to junk bond status, if a sufficient rate increase was not granted. But after the controversial PUC decision on rates last week, the agencies cut the ratings to one notch above junk.

They warned if the legislature or some other body does not do something to recover the confidence of the financial markets, the utility would become insolvent and be forced into bankruptcy.

Governor Gray Davis is scheduled to unveil his plan to deal with the energy crisis in California tonight in his state of the state address. The White House has also scheduled a summit on the California crisis Tuesday.