Edison bailout? No, just a late PUC bow to legal reality

WITH Gov. Gray Davis unable to persuade the Legislature to save Southern California Edison from bankruptcy, the Public Utilities Commission rides to the rescue, signing a deal in which consumers of electricity will pay most of the utility's debts.

Consumer advocates are griping about a bailout and a giveaway. Political cynics are dissecting the interaction between Davis and the PUC for signs of collusion.

We see a more straightforward explanation: The PUC bowed to legal realities.

The deal settles a federal lawsuit filed by Edison against the PUC. Pacific Gas & Electric is pursuing a similar suit. The suits contend that federal law entitles utilities to pass on to consumers the costs of acquiring electricity.

Last winter, as the wholesale price of electricity soared, the PUC refused to allow the utilities to charge consumers more. Eventually, the utilities ran out of money, and the state took over the business of buying electricity. PG&E filed for bankruptcy. Edison futilely pursued a rescue plan in the Legislature. And in the spring, the PUC raised the price consumers pay for electricity.

If the settlement is a politically motivated gift to Edison from the PUC, it comes from an unlikely source. Why would the same PUC that stood by as the utilities were financially bludgeoned now simply hand Edison a windfall? As for providing political cover for Davis, on the same day the PUC announced the Edison plan, it torpedoed the governor's plan to issue bonds to finance the state's purchases of electricity.

There's a simpler possibility. The PUC settled for the customary reason people settle lawsuits: It was worried about the eventual verdict.

A decision in favor of the utility could have resulted in customers paying all the utility's debts. Instead, Edison shareholders will contribute about $1.2 billion in dividends they will not receive.

Electric rates, which were raised substantially earlier this year for some customers, will not be raised further. Because those rates more than compensate Edison for the cost of power, consumers will in effect be paying off some $3.3 billion of the debts.

The settlement maintains PUC oversight of Edison operations. Pacific Gas & Electric, in bankruptcy court, has filed a proposal that removes most of its operations from PUC regulation.

The Edison settlement still needs the approval of federal Judge Ronald Lew. He should be diligent in assuring himself that it is in the public interest. Consumer groups, and other interested parties, need enough time to point to any problems.

The main question to the PUC is not why it did this deal, but why it didn't do it a year ago. In the past year, the PUC has raised rates, and now it has conceded utilities were largely right in demanding to have their costs reimbursed.

Coming to these conclusions a year ago would have avoided a world of trouble.