Utility overcharged customers, appeals court rules

The ruling would entitle PG&E’s customers to refunds, said Harvey Reiter, a lawyer for the Sacramento Municipal Utility District.

shareholder bonuses, rightly argued that the payments “reward PG&E for doing something it was already required to do,” Chief Judge Sidney Thomas said in the 3-0 ruling.

The ruling would entitle PG&E’s customers to refunds amounting to one-half of 1 percent of PG&E’s profits for the past few years, and to a ban on such charges in future years, said Harvey Reiter, a lawyer for the Sacramento Municipal Utility District, which supported the state commission’s lawsuit.

The Public Utilities Commission has estimated that the payments would save PG&E customers $25 million in rates for the coming year, according to commission spokeswoman Terrie Prosper.

“We are disappointed with the ruling and intend to pursue the issue when FERC considers its next steps in the proceedings,” PG&E said.

The nonprofit Independent System Operator was established by the state Public Utilities Commission in 1997 to manage the power grid.

The commission issued legally binding orders to the state’s largest utility companies, including PG&E, to transfer control of their transmission lines to the newly created entity, which was intended to supply electricity more reliably and at lower cost while reducing state regulation. The independent operator was unable, however, to fend off the state’s energy crisis of the early 2000s, marked by blackouts and rising prices.

The independent operator is overseen by the Federal Energy Regulatory Commission because the operator supplies electricity in interstate commerce. Since 2007, the federal agency has granted PG&E’s request to increase its maximum shareholder returns under a federal law rewarding utilities that join regional transmission organizations.

When the state Public Utilities Commission challenged the shareholder payments in 2014 and 2015, the federal agency said its 2007 regulatory order justified the payments. But the appeals court said Monday that the agency was ignoring the purpose and wording of its own order.

The order described the payments as an “incentive” and an “inducement for utilities to join, and remain in, transmission organizations,” Thomas wrote. “An incentive cannot ‘induce’ behavior that is already legally mandated.”