Wednesday, February 07, 2001 1:49 AM MST Power crisis: Suit seeking Edison trust fund to protect customers' deposits By Leslie Gornstein Associated Press

LOS ANGELES -- An Orange County man is suing Southern California Edison and its parent company on behalf of utility customers, demanding that Edison account for the money it has collected in deposits.

The suit, filed Jan. 31 in Orange County Superior Court, asks that the company set aside at least $4.8 billion in a trust account to ensure that customer deposits won't be affected by Edison's financial problems.

The suit comes as the state is trying to find a way to restore the financial health of the state's two largest utilities, Edison and Pacific Gas and Electric Co. The utilities say deregulation of the state's power market has stuck them with roughly $12.7 billion in losses because they've been prevented from passing soaring wholesale energy costs to customers.

Edison customer Frank Hemstreet of Newport Beach, the suit's only named plaintiff, paid the utility a $150 deposit and was concerned about his ability to get it back, Hemstreet's attorney, Timothy Carl Aires, said Tuesday.

He said the suit represents every customer who has provided a security deposit for Edison services.

"It is our belief that they should have reserved those funds, particularly where customers have deposited those funds thinking they were indeed deposits," Aires said.

Hemstreet was unavailable for comment, and Edison officials did not return telephone calls seeking comment.

The $4.8 billion noted in the lawsuit represents the amount Edison transferred to its parent, Edison International, from 1996 to 1999, to give to shareholders.

Disclosed in an independent audit last week, the transfers have outraged consumer groups and some lawmakers, who blame the action for contributing to Edison's financial problems. They have argued that Edison International has enough cash to bail out its subsidiary.

A separate audit showed PG&E also transferred money to its parent company, PG&E Corp. The utility turned over nearly one-third of its cash flow to its corporate parent during the first nine months of 2000, the audit showed.

Aires said he asked Edison to disclose how much it is holding in deposits. When he received no response, he asked for the amount of the transfer to be set aside.

The suit alleges the transfer from the utility to its parent company constituted unfair business practices, stating the utility was either insolvent at the time or became insolvent afterward.

The suit presents no evidence indicating Edison has reneged on repaying any deposits. The PUC allows Edison to charge deposits as a way for customers to establish credit. Deposits for domestic Edison accounts typically run twice the estimated average monthly bill.

The utilities and their parent companies will be the subject of a state Public Utilities Commission hearing Thursday. The PUC will consider investigating whether Edison, PG&E and San Diego Gas and Electric violated rules authorizing them to create holding companies and making the utilities subsidiaries.

The new companies were allowed to pursue unregulated businesses as long as those activities did not compromise the utilities' ability to serve customers. The utilities' capital needs also were to be a top priority.

Consumer advocates said they hope Hemstreet's lawsuit will prompt Edison International to take more responsibility for California's energy woes. It's unclear, however, whether the lawsuit would have any wider effects.

"Money put down for deposits must be guaranteed by the company," said Medea Benjamin, spokeswoman for the Campaign Against Utility Rate Hikes. "(Edison International) cannot wash their hands of this."

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-- Martin Thompson (mthom1927@aol.com), February 08, 2001