Two Southern California utilities should return at least $648 million to customers because of evidence of secret deal-making in a nearly $5 billion settlement following the closing of a nuclear power plant, a state agency said Friday.
The Office of Ratepayer Advocates, an arm of the California Public Utilities Commission, said in a statement that private conversations between the commission's then-President Michael Peevey and a Southern California Edison executive gave the company an unfair advantage in negotiations over how to divide costs left behind by the now-defunct San Onofre plant.
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"These two individuals worked in secret to outline an acceptable financial settlement," the office said. "This back-channel deal between a regulator and the utility may have undermined the efforts ... to negotiate the best deal for ratepayers."
The statement said "the process for fair dealings at the (commission) had been severely compromised."
The office's proposal does not call for voiding the 2014 deal. Instead, it asks that Edison and minority owner San Diego Gas & Electric Co. pay additional funds to customers.
The commission last year approved a settlement under which consumers would pay $3.3 billion and shareholders would pay $1.4 billion of costs stemming from the closing of the twin-reactor plant, located between Los Angeles and San Diego.
At issue was who should take the financial hit for the early closing of the twin reactors — company shareholders or customers. Edison decided to close the plant in June 2013 but it hadn't produced electricity since January 2012, after a small radiation leak led to the discovery of extensive damage to tubing that carried radioactive water.
Edison said in a statement that the 2014 financial settlement is fair and was negotiated properly. The company disagreed with the proposed penalty and disputed that the company had an unfair advantage.
Edison said it is participating in a commission probe reviewing whether the company violated any rules.
The commission approved the settlement involving Edison, SDG&E and consumer advocates unanimously in November. At the time, critics said it shortchanged ratepayers.
The state advocates said Peevey and the Edison executive, former executive vice president for external relations Stephen Pickett, outlined a framework for the settlement in a private discussion in 2013.
The agency, which took part in the negotiations, said it was "troubled by the possibility that we might have been able to strike a better deal."
"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," the office said.
Peevey's activities have been under scrutiny in a separate case.
State and federal prosecutors have notified Pacific Gas & Electric Co. that they are investigating emails between commission officials and PG&E employees. The utility has released emails in which a PG&E executive described a private dinner where Peevey discussed PG&E regulatory matters while soliciting large donations from the utility.
The PG&E executive, who has since left the utility, said Peevey asked PG&E to donate more than $1 million to support an environmental ballot initiative and make a separate $100,000 donation to a celebration of the utility commission's 100th anniversary. Peevey has made no public comment on those allegations.
Those and other emails heightened complaints by ratepayers groups that the commission under Peevey was too cozy with utility companies the commission regulated.
Peevey announced in October that he would not seek another term after 12 years on the board. A commission spokeswoman did not immediately respond to an email seeking comment.
Associated Press writer Ellen Knickmeyer in San Francisco contributed to this report.