MEDIA CONTACT: Terrie Prosper
October 2, 2001
PUC AND EDISON SETTLE FEDERAL LITIGATION TO MAINTAIN UTILITY SERVICE WITHOUT RAISING RATES
The California Public Utilities Commission (PUC) and Southern California Edison (Edison) today reached a settlement in the Filed Rate Doctrine lawsuit Edison filed in federal court against the PUC. The settlement is intended to restore Edison to creditworthiness so that it is able to resume procuring the electricity needed by its customers; limit ratepayers' costs of paying off the debt; and maintain the state's role in regulating the investor owned utility by enabling Edison to pay down its back debts over a reasonable, certain period of time. The terms of the Settlement Agreement include:
· Edison will apply cash on hand, plus all of its revenue over recoverable costs, to paying off its back debt. The PUC and Edison have agreed that the amount of the back debt to be recovered from ratepayers is the amount of certain outstanding debt Edison had at August 31, 2001, less the cash on hand on that date, less an additional $300 million adjustment. The amount that will be paid down pursuant to the settlement agreement is estimated to be $3 billion as of the end of this month. The parties believe that the amount to be paid by ratepayers will be much less than the cap.
· Edison will not pay any dividends on its common stock through 2003, or on the full payment of its debt, if sooner. If Edison has not fully paid its back debt by the end of 2003, the Commission retains the discretion to determine whether Edison will pay a dividend in 2004. Edison is free to resume paying dividends in 2005. Since Edison's annual dividend has typically been about $400 million, Edison's shareholders will have forgone at least $1.2 billion in dividends and possibly more, in addition to the $300 million adjustment.
· Edison will apply 100% of any recovery it obtains from refund proceedings at the Federal Energy Regulatory Commission or litigation against sellers to pay down the back debt. Edison commits through court order to work with the PUC and the Attorney General in pursuing litigation against the energy sellers.
· The PUC can direct Edison to use $150 million each year for other utility purposes, including the provision of additional energy efficiency monies, which would otherwise be used to pay down the Edison debt.
· The PUC agrees not to lower Edison's retail rates below their current level through the end of 2003 unless the back debts are recovered. However, rates may be reduced as a result of a securitization of the debt or reduced DWR revenue needs.
· The PUC agrees to set rates not higher than the current rate, to enable Edison to recover the remaining amount of the back debt over 2004 and 2005 if Edison's back debt has not been recovered by the end of 2003.
· There are no concessions of PUC or State regulations or regulatory authority over Edison, nor is there any deregulation of valuable transmission and generation facilities.
· Edison may make up to $900 million in capital expenditures annually.
"This settlement embodies a fair and judicious way for Edison to become solvent and get back in the business of buying power, while meeting the needs of ratepayers and the state of California," said Loretta Lynch, President of the PUC. "The settlement also ensures that all of the benefits of any refunds arising through litigation against power generators and marketers that profited from unjust and unreasonable energy prices will benefit ratepayers."
This agreement settles a November 2000 federal court lawsuit filed by Edison against the PUC, in which Edison claimed that the Commission's actions in not providing sufficient retail rates, violated federal law and was an unconstitutional taking of its property. Under this agreement, Edison will release the PUC from all claims in its lawsuit and will also withdraw any challenges to the Commission's decisions implementing AB 1X, AB 6X, and the TURN accounting proposal.
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