ORA Director Joe Como Response to Conduct by Southern California Edison and Former CPUC President Michael Peevey to Undermine the SONGS Settlement Process
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See Hotel Bristol Notes
SAN FRANCISCO, April 17, 2015 – The Office of Ratepayer Advocates (ORA), the
independent consumer advocate within the California Public Utilities
Commission (CPUC) wants at least $648 million returned to customers of
Southern California Edison Company (Edison) and San Diego Gas & Electric
Company (SDG&E) because of recently revealed evidence of inappropriate
conversations between former CPUC President Michael Peevey and Edison
Executive Vice President Stephen Pickett. These two individuals worked in
secret to outline an acceptable financial settlement of the San Onofre Nuclear
Generating Station (SONGS) closure. This back-channel deal between a regulator
and the utility may have undermined the efforts of ORA and The Utility Reform
Network (TURN) to negotiate the best deal for ratepayers.
ORA is outraged at the revelations regarding CPUC rule violations that
occurred prior to the commencement of the SONGS settlement negotiations, and
that Edison’s actions have undermined the results of ORA’s good faith
negotiations to represent the best interests of ratepayers. ORA looks forward
to actively participating in any investigation to uncover further wrongdoing.
On February 9, 2015, ORA first became aware of the discussion between Peevey
and Pickett when Edison filed with the CPUC a 2-year late ex parte notice of
the meeting that occurred in March 2013 in Warsaw, Poland. On Friday April 10,
2015, we learned that the conversation outlined a framework for a SONGS
settlement and was memorialized on hotel stationery (commonly referred to as
the Hotel Bristol Notes). ORA had not seen the Hotel Bristol Notes until they
were publically released one week ago by the California Attorney General.
ORA has reviewed the Hotel Bristol Notes and has made a comparative analysis
with the final SONGS settlement agreement. The Hotel Bristol Notes appear to
set a framework for settlement that is similar to the elements of the
settlement that was ultimately accepted by the CPUC. The Hotel Bristol
Notes appear to demonstrate the degree to which Peevey and Pickett
collaborated to orchestrate a settlement of the SONGS outage investigation.
Based on ORA’s analysis of the Hotel Bristol Notes and the final settlement
agreement, customers still saved at least $780 million more than the
“deal” that Peevey and Pickett had described.
However, ORA cannot honestly say that it got the best deal for ratepayers.
Edison was likely able to use its knowledge of Peevey’s position to steer
the settlement in the direction it wanted. While ORA believes it worked to
strike a good deal for ratepayers based on legal precedents, we are troubled
by the possibility that we might have been able to strike a better deal.
Conversely, to simply undo the SONGS settlement would not be beneficial to
ratepayers. The settlement resulted in a cost savings of $1.4 billion for
utility customers -- $1.12 billion for Edison customers and $286 million for
SDG&E customers. Customers are not currently required to pay for the
defective replacement steam generators as of the date they ceased operating on
February 1, 2012. Customers are, however, required to pay the costs associated
with SONGS during the time the plant was operable and for other costs not
related to the defective replacement steam generator. Separately, customers
have paid into a decommissioning trust fund for several decades that will
cover the costs to decommission SONGS.
The process for fair dealings at the CPUC had been severely compromised. But
to simply invalidate the settlement and go back to the hearing room would
essentially give Edison the opportunity to litigate for an outcome that may be
worse than the settlement. Edison should not be given a second bite at the
apple. But if the CPUC were to scrap the SONGS settlement, ORA is prepared to
vigorously litigate for a better outcome.
Alternately ORA recommends, at a minimum, Edison be sanctioned and required to
return to ratepayers an additional $648 million, which represents the
difference between ORA’s original litigation position and what the
settlement provided. Furthermore, as more information is developed in the
investigation that determines the extent to which Edison worked to mislead the
CPUC by artifice or false statements, Edison should be further sanctioned.
See ORA’s Comparative Analysis.
See ORA’s SONGS webpage for details and link to Settlement.
For more information on ORA, please visit www.ora.ca.gov.