Edison Argues for Lower Penalty
By Kevin Smith, San Gabriel Valley Tribune, Calif.
Feb. 1–ROSEMEAD — Southern California Edison is hoping to sharply reduce the damages associated with its rigged customer satisfaction surveys and falsified safety data.
In a hearing held Wednesday before the California Public Utilities Commission, SCE Chief Executive Officer Alan J. Fohrer said Administrative Law Judge Robert Barnett’s order that the utility pay a refund and penalty totaling $200million “goes way beyond reason.”
SCE, a division of Rosemead-based Edison International, has proposed a combined refund and self-imposed penalty of $51.9 million — a figure it says goes “well beyond any evidence of financial impact from the conduct in question.”
On Oct. 1, Barnett ordered the utility to refund nearly $160 million to customers and to pay a penalty of $40 million for failing to comply with commission data reporting rules.
The CPUC’s internal consumer advocacy division and other commission staff members in charge of the Edison investigation are calling for even stiffer penalties that would hike the total price tag to $237 million.
The ordered refunds and penalty stem from a 2004 announcement in which Edison said that some of the employees in its service planning group — the division that helps contractors and builders obtain power for new projects and project expansions — falsified data used in customer satisfaction surveys taken from 1987 through 2003.
SCE said the results were manipulated to help ensure that employees and SCE won bonuses from the commission.
Under the CPUC’s performance-based rate-making mechanism, the results of the customer satisfaction surveys are used, in part, to determine whether SCE receives an incentive reward or penalty.
The utility recorded customer satisfaction-related incentive rewards totaling $28 million from 1997 through 2000. SCE had determined it was also in line to receive another $10 million bonus for 2001 and 2002 and an additional $10million for 2003.
The utility’s internal investigation revealed that employees had transposed digits in clients’ phone numbers, deleted numbers or replaced them with phone numbers of other people who would pose as builders or contractors, offering glowing reviews of Edison’s service.
SCE turned over the results of its investigation to the CPUC, which then launched its own investigation.
Edison also found its employee health and safety data to be flawed, as well as the data used to document meter readers’ encounters with SCE customers.
But no wrongdoing was found in either of those operations, according to Forher.
The judge initially said he would examine the issues in two phases. The first would address the rigged survey results pertaining to the service planning group and the second would deal with employee health and safety data reporting and documentation of meter reader/customer encounters.
But Fohrer said the judge didn’t follow that plan. There was no second phase, he said, so Edison didn’t have time to submit its findings on the other issues.
“The judge decided that if the service planning department was tainted … every area must be tainted,” Forher said. “But that’s contrary to the evidence.”
SCE has instituted several changes in the wake of its investigation, including bringing in an ethics consultant and establishing an ethics office.
Forher said SCE arrived at the $51.9 million figure by taking into account the rewards the utility received and rewards it was in line to receive.
By that standard, SCE’s proposed ratepayer refund — combined with an impartial judge’s recommendation that the utility be fined $2.5 million for its employee wrongdoing — would result in a total payout of $51.9, according to Forher.
Paul B. Fremont, an equity analyst with Jefferies & Co., said the judge’s $40 million penalty seems overly tough.
“If a company voluntarily brings something like to the commission’s attention it’s hard to understand why you’d recommend such a significant penalty,” he said. “It would seem to me that you’re sending a signal to companies that if they discover a problem, the next time they should keep it to themselves because they’ll punish you for doing the right thing.”
Stephen Pickett, a senior vice president and general counsel for SCE, said the utility hopes the commission will re-examine the judge’s decision and opt for a lesser punishment.
“We don’t condone the misconduct that took place in the service planning unit,” he said. “But that is a very small part of our overall operation. It has been blown all out of proportion.”
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