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Southern California Edison may face a fine for mismanagement

Jordan Smith
By Jordan Smith March 11th, 2021
For business

California utilities face a major fine.

Southern California Edison (SCE) could face a $140 million fine due to mismanagement of its energy efficiency program. SCE designed this program to bring savings to customers. Public advocate’s office Cal Advocates proposed the fine. This follows criticism of SCE’s rebates to lower the cost of energy-saving light bulbs.

The program gave incentives to SCE and San Diego Gas & Electric (SDG&E) so they could ship energy-efficient light bulbs from manufacturers to retailers. Retailers then passed on discounts to customers when they purchased the light bulbs. The utilities’ shareholders also earned rewards if sales of the bulbs increased.

According to Cal Advocates, problems with the program began in 2017. This was when SCE expanded the program to include small and discount stores in low-income communities. The utilities claimed these stores would not maintain sales records like larger big-box retailers. So, they allowed manufacturers to charge stores for the number of bulbs shipped instead of how many bulbs the retailers sold.

Large number of bulbs unaccounted for

The advocate’s office noted SCE shipped huge amounts of bulbs to small stores between 2017 and 2018. Cal Advocates suggested bulb manufacturers were improperly receiving ratepayer funds. The report found 80 percent of the bulbs sent by SCE to stores in 2017 were either overstocked or missing. 95 percent of light bulbs sent by SDG&E were also overstocked or missing.

The Utility Reform Network, a consumer advocacy group that supports the fine, learned 15 million light bulbs could not be tracked down.

“This mismanagement by [SCE] is so rampant that it’s on the utility to demonstrate that they actually paid for bulbs that exist and that they actually managed the program correctly,” commented Mike Campbell of Cal Advocates. He added the mismanagement coincided with a decision by SCE to relax oversight on the program.

On top of the proposed fine, Cal Advocates is urging SCE to return $124 million to ratepayers in program expenses it received between 2017 and 2019.

More shipments reported than total California light bulb sales

In January 2020, California PUC Judge Julie Fitch ordered a formal inquiry into the program.

Pointing to one of the program’s major discrepancies, Fitch observed, “The reported number of light bulbs shipped to stores was higher than the number of total California light bulb sales determined from other data sources, according to the evaluators.”

Investigators found that of 69 retailers questioned in SCE’s service area, 51 said they were overstocked. 33 stores said they were forced to give light bulbs away for free to clear their stock.

SDG&E agrees to settlement

SDG&E reached a settlement on the mismanagement of the program in early December. It agreed that its shareholders would pay a $5.5 million fine. In addition, the utility agreed to reimburse $51.6 million in charges to ratepayers.

“SDG&E acknowledges its failure to prudently manage the upstream lighting program in 2017-2019 and that SDG&E knowingly submitted inaccurate information, compliance documents, and other reports to the commission,” the settlement agreement read.

The settlement also noted that SDG&E employees expressed concerns about the program but the utility ignored them.

One mitigating factor for SDG&E was that the utility hired an outside investigator to examine the program, the public advocate’s office said. The 2020 inquiry commissioned by SDG&E found that at least one manufacturer falsified invoices it was sending to SDG&E. Also, the utility’s employees processed invoices that did not adhere to correct procedures. The investigator stressed that these violations were limited to a small number of employees in the customer programs team, the San Diego Union Tribune reported.

SCE alleges proposed penalties are “excessive”

SCE says it is reviewing how to respond to the proposed penalties and intends to file its comments soon. A company spokesman stated that Cal Advocates’ proposal recommends “excessive penalties and refunds not commensurate with the issues raised.”

The spokesperson added, “SCE will continue to work cooperatively with the Commission and interveners to arrive at an appropriate solution.”

The public advocate’s office disagrees, insisting that the proposed settlement is justified. “Is the customer going to open their bill and go, ‘Oh my goodness. Look at this savings?‘” Campbell commented. “Probably not, but it is totally reasonable and appropriate and is the kind of thing the utility, the executives, and the shareholders will notice. And that’s the real importance of this, to have meaningful consequences for just miserable management of a program and really not taking due care with ratepayers’ money.”

 

Jordan Smith is a freelance journalist and translator covering issues related to energy, the environment, and politics. His work has appeared on the independent news site Opposing Views and at the Canadian Labour Institute.

[Jose Carlos Cerdeno]/Shutterstock