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Lawyer for Consumer Group Urges Judges to Block PUC Deal With Edison

An agreement between Southern California Edison Company and the California Public Utilities Commission settling a federal suit over electric rates violates the constitutional rates of ratepayers, the attorney for a consumer group told the Ninth U.S. Circuit Court of Appeals yesterday.

The CPUC and the giant utility entered into a “secret, private deal…with no due process whatsoever,” Michael Strumwasser told the panel, consisting of Judges Sidney Thomas and Johnnie Rawlinson and Senior Judge James Browning. Consumers stand to lose hundreds of millions of dollars in refunds as a result, the lawyer said.

Strumwasser, of Santa Monica’s Strumwasser & Woocher, represents The Utility Reform Network, or TURN. The group is appealing U.S. District Judge Ronald S.W. Lew’s approval of the settlement reached last fall in Edison’s suit challenging that it had a right under federal law to raise its retail rates in response to increases in wholesale power costs.

The settlement allows the utility to use ratepayer and shareholder funds to repay $3.3 billion in debts owed to electric power suppliers—including funds collected from ratepayers after the rate freeze imposed by the state’s deregulation law expires by the end of this month.

The CPUC had previously ruled that any such use of ratepayer funds would be illegal, a holding left standing by the state appellate courts.

Edison has said the settlement will allow it to avoid joining Pacific Gas & Electric Co. in bankruptcy court. TURN has characterized the deal as a state “bailout” of financially troubled Edison that will keep rates artificially high.

Strumwasser argued that Lew should never have heard the case, saying federal jurisdiction was precluded by the Rooker-Feldman doctrine generally barring interference by lower federal courts in state proceedings.

“The issues here were fully litigated in California courts,” the attorney told the judges.
Thomas, however, questioned whether the doctrine can be applied to an administrative ruling. If not, he said, the doctrine might not apply to Edison, since it was not a party to the litigation that followed the prior PUC ruling, although it was a party before the PUC.

Strumwasser also argued that TURN, as an intervenor in the prior proceedings, and the consumers it represents should have been a party to the settlement negotiations. Instead, he contended, the rights of the ratepayers had been swept away without any findings that the prior PUC rulings were flawed or that the questioned portions of the deregulation law were invalid.

But Edison attorney Henry Weissman and PUC General Counsel Gary M. Cohen urged the court to leave the settlement in place. Nothing in federal law, Weissman argued, requires a court to find a state law unconstitutional before approving a settlement that renders the law unenforceable.

Rawlinson questioned whether the court has to defer to the PUC’s conclusion that it had the authority to enter into the settlement. TURN argued in its briefs that the settlement violates the state Constitution’s provision barring administrative agencies from refusing to enforce laws on constitutional grounds absent a judicial finding of unconstitutionality.

Weissman said the PUC’s finding as to its own authority was entitled to “an especially strong form of deference,” given the agency’s expertise and the public interest served by the settlement.

Thomas questioned whether the issue of the PUC’s authority ought to be certified to the California Supreme Court, given the “important issues of state law” that were raised.

Weissman argued against certification, citing the need to decide the case quickly, a U.S. Supreme Court case holding that a state agency’s assertion of its right to settle a case in federal court should be accepted unless clearly contrary to state law, and a provision in California’s certification rule limiting the procedure to cases in which the answer to the certified question will fully dispose of the federal case.

Cohen said that the PUC would welcome a state Supreme Court ruling on the issue, but that it “respected” Edison’s view of the need to expedite the outcome

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