Count Friedrich von Olsen’s Forum… Or Against ’em

According to Southern California Edison, the agreement to have its ratepayers cover $3.3 billion of the cost for shutting down the San Onofre Nuclear Plant is an eminently reasonable one and if the California Public Utilities Commission doesn’t allow it to proceed those ratepayers will face even higher costs.
That settlement was signed off on by the California Public Utilities Commission two years ago but the deal is now being reexamined. That is because the California Public Utilities Commission at that time was headed by Michael Peevey, who used to be the president of Southern California Edison as well as a senior executive and then the president of Southern California Edison’s parent company, Edison International. Thus, Edison had uncommon access to Michael Peevey. How uncommon?
In 2012, after faulty replacement steam generators were installed at the plant, Southern California elected to have San Onofre shut down prematurely, some five to seven years before the life of the plant was set to expire, thereby requiring that Southern California Edsion find an alternative source for a major portion of the electricity it marketed to Southern California, as well as bear the considerable cost of shuttering the facility. During 2012 and 2013, secret dialogues between Peevey and Stephen Pickett, Edison’s executive vice president, as well as with other Edison corporate officers, began, the gist of which pertained to how Edison might ensure that the cost of the San Onofre plant closure would be transferred to the company’s customers rather than its stockholders. Remember, Mr. Peevey, in his role as chairman of the California Public Utilities Commission, is supposed to be looking after the interests of California’s citizens. Instead, he was colluding with the industry he was supposed to be regulating. Over time, a plan evolved. The deal was sealed, essentially, on March 26, 2013, far from Southern California it would turn out, at the Bristol Hotel in Warsaw, Poland, where Peevey met with Pickett and hammered out a deal by which utility customers are to pay more than $3.3 billion of the $4.7 billion in costs for the full shuttering of the plant. The meeting between Mr. Peevey and Mr. Pickett was a secret one, and so it remained until a private investigator working for a public interest lawyer – former assistant U.S. Attorney Michael Aguirre – was able to unearth evidence of the meeting almost two years later…
None of that should be relevant, according to Southern California Edison. In an 80-page filing with the California Public Utilities Commission, which is no longer chaired by Peevey, Edison maintains that on the basis of legal precedent the agreement reached over San Onofre’s closure should stand. After all, according to Edison, closing a nuclear plant is expensive and Edison is just following standard protocol and besides, a deal is a deal…
What Edison is saying is that it is only right that its customers, and not its stockholders, pay the major freight on the closure…
I feel the need to make full disclosure here. I am, of course, a Southern California Edison customer. I am also, ahem, a Southern California Edison stockholder, some might say a major stockholder. There are fewer of us stockholders than there are Edison customers, to be sure. So when Southern California Edison rapes, I mean exploits, I mean makes a profit from its far more numerous customers, it spreads that pain across a vast number of people. We stockholders, and particularly we major stockholders, stand to make a killing when the customers are raped, I mean exploited, I mean pay their bills. So, it is in my pecuniary interest to pay a higher rate for the electricity I personally use in my capacity as a customer, since this translates, after one considers that millions of other customers are likewise being raped, I mean exploited, I mean paying their higher bills, into a substantial profit for me as a stockholder. I hope that is clear, because now I am going to shoot myself in the foot with what I am about to write…
So, let’s see if I have this right: The ownership of Southern California Edison – people like me – employed some incompetent people who failed to operate the San Onofre Nuclear Plant properly, resulting in it having to be shut down prematurely, thereby requiring that Southern California Edison utilize other means of producing its electricity for Southern California, an added expense. And the ownership of Southern California Edison – people like me – who would normally have to bear the burden for having employed these gross incompetents to run our power plant have utilized the provision of favors to one of our past presidents who happens to have been at this crucial time the chairman of the California Public Utilities Commission to finagle a deal where we don’t have to pay for our lack of due diligence and proper oversight of the incompetent employees we have working for us. We get to act imprudently and still profit because the suckers, I mean customers, we are selling electricity to can get stuck with the bill. And no one should pay any attention to how it was that we greased the way for this with that little secret meeting in Warsaw. Do I have that right?
Ron Nichols, Michael Peevey’s current successor as Edison’s president who may someday be chairman of the California Public Utilities Commission for all we know, spoke for me and the rest of us Edison stockholders, when he said, “We believe this public process will allow interested parties to review the settlement and confirm for themselves that it should stand.” Well said, Ron, I must say. Given the value of my Edison stock, I stand to realize, according to the best calculations of my accountant, some $150,000 or $160,000 from this over the next five years or so…
But wait, Ron Nichols might not have the last word on this. Indeed in May, California Public Utilities Commissioner Catherine J.K. Sandoval and Administrative Law Judge Maribeth Bushey issued a ruling to have the entire matter reopened. That is what prompted Edison to lodge its 80-page document with the commission making its defense of the agreement. Judge Bushey and Ms. Sandoval said the meeting between Michael Peevey and Stephen Pickett gave them pause and they want to determine if something untoward went on here…
Consumer advocates have made their own filings, all of which argue in favor of the agreement being reconsidered in its entirety. They suggest customers should not be made to cover the costs of corporate mistakes and operational misfeasance on Edison’s part. And parenthetically, they are suggesting that Mr. Peevey’s and Edison’s failure to report the back-channel communication between Mr. Pickett and the other Edison executives and Mr. Peevey with regard to the plant closure deal just might constitute something improper…
That’s not the way Ron Nichols sees it. The San Onofre power plan provided Southern California residents with reliable power for 30 years, he says and stockholders have already been punished enough over the faux pas with the faulty steam generators, having taken a hit when the company had to produce electricity from other sources. And besides, Ron says, we shareholders bore the brunt of paying for those defective generators, having defrayed $696 million of their $866 million cost when the ratepayers paid only $168 million toward those defective generators’ purchase. It’s time now, Ron insists, for the customers to shoulder the burden of paying for zillions and zillions of electrons coursing through those power lines…
Late last year, the commission fined Edison for having engaged in the secret conferences with Mr. Peevey. Edison thought that was the end of it. But many people feel that those secret meetings set up a circumstance that has resulted in customers taking a $3.3 billion hit. Michael Aguirre and other ratepayer advocates are hoping that Judge Bushey will see her way clear to declare the $3.3 million deal non-binding. Commissioner Sandoval agreed. “In light of our December 2015 penalty levied against Edison,” she said, “it is prudent to review whether the settlement reached before those disclosures remains in the public interest and in accordance with our settlement rules.” Time will tell…

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