Only 1 Edison Contract Is Called Self-Serving

Just one of 18 disputed electric power contracts signed by Southern California Edison gave preferential treatment to a sister company of Edison, officials at the California Public Utilities Commission said Wednesday.

Earlier this week, a unit of the PUC gave the impression that it was accusing Edison of “self-dealing” on 18 contracts it signed to purchase electric power in 1985-87.

The charge of self-dealing is limited to a contract in which Edison agreed to buy electricity from a big cogeneration project owned equally by Texaco, the big oil company, and Mission Energy, which like Edison is a subsidiary of SCEcorp.

That contract had several elements that were self-serving and resulted in more generous terms for the Mission Energy-Texaco venture than Edison was permitting in contracts it was signing with other companies, the PUC’s Division of Ratepayer Advocates said.

The contract with that venture, Kern River Cogeneration Co., cost Edison customers $33 million in unnecessarily high rates for electricity and $3.7 million in undeserved bonus payments, the PUC division said.

The other 17 disputed contracts were signed between Edison and various independent power producers with no corporate ties to the utility, PUC officials said. In those cases, Edison is accused of sloppy administrative work that resulted in $83 million in excessive electric rates.

In all 18 cases, Edison said it actually saved ratepayers money and vowed to fight the charges before the PUC. Far from costing ratepayers extra, the utility said, the Kern River contract has saved customers $37 million.

But the PUC division contends that, with miscellaneous other claims, Edison overcharged customers and should be required to refund $124.3 million to them. In a long report, the division also urges that Edison be required to get out of the business of selling power to itself.

The accusations by the Division of Ratepayer Advocates are only recommendations. Final action will be taken next year by the five-member commission.

Federal Requirements

The report focuses on the contracts that Edison signed in the aftermath of federal legislation that requires regulated utilities to buy power from any independent producers that can supply it. The law was intended to foster the creation of an alternative-energy industry.

Edison and other utilities then set up unregulated subsidiaries and entered this new market themselves. Edison has seven contracts with large cogeneration projects in which its Mission Energy unit is a 50-50 partner. The utility also has dozens of contracts with other, independent ventures, most of them smaller producers of energy.

William Ahern, who heads the PUC’s Division of Ratepayer Advocates, said Wednesday that the division’s public statement on Monday that disclosed its critical report on Edison focused almost entirely on the disputed contract with Mission Energy because it was considered the most serious. He agreed that this was misleading.

The only Edison-Mission Energy contract that state regulators have reviewed so far, it contained several features that were deliberately designed to favor Mission Energy, Ahern said. He said the division has suspicions that the other Mission Energy contracts, which are due for review next year, contain the same self-dealing features.

“The things they did with the independent power producers were mistakes,” Ahern said. “The things they did with themselves were special deals.”

Howard P. Allen, chairman and chief executive of SCEcorp, reiterated statements that the utility “bent over backward” to avoid such charges because of the obvious potential for giving itself preferential treatment. Its contracts with Mission Energy were designed to be 2% cheaper than those with independent producers, he said.

Alternative Energy

Part of the dispute over the other contracts stems from Edison’s signing of such contracts in the early stages of the burgeoning alternative-energy industry, when no state-approved standardized contracts had yet been established.

While objecting to any “sweetheart” deals between Edison and its own subsidiary, lobbyists for California’s independent power producers supported Edison’s contention that it shouldn’t be penalized for having pushed ahead with such contracts when under pressure to do so.

“What is truly ironic about this matter,” an Edison spokesman said Wednesday, “is that in 1983 Edison was penalized $8 million by the PUC for negotiating too hard with independent power producers to keep the cost of these contracts down for the benefit of Edison ratepayers. Now, the Division of Ratepayer Advocates turns around and alleges that Edison has paid too much. In fact, Edison has sought throughout to negotiate contract terms which would hold costs down for its customers.”

But Ahern said Edison pushed ahead with those contracts in such careless fashion that the contracts inadvertently cost ratepayers more rather than less.