Edison is hit hard for fraud on survey
There is “overwhelming” evidence that senior managers at Southern California Edison knew about a seven-year fraud at the Rosemead utility to collect millions of dollars in customer-funded incentives, according to a judge’s decision released Monday by the California Public Utilities Commission.
The opinion, written by Administrative Law Judge Robert Barnett, makes official the $200-million cost to Edison that he outlined Thursday in an unusual oral preview of his conclusions. The decision required Edison to lose $160 million in performance bonuses and to pay a $40-million fine -- among the largest ever assessed by the commission.
The $160 million in bonuses would be returned to customers in some form, possibly through a rate reduction. The $40-million fine would be added to California’s general fund.
“SCE’s activity was deliberate, occurred over a seven-year period, cost the ratepayers $124.7 million, and without the intervention of a whistle-blower, might be continuing today,” Barnett wrote.
The facts of the case, he said, warranted a substantially higher fine of $102 million in addition to the returned bonuses. But because of the utility’s “excellent cooperation after the fraud and manipulation came to light,” Barnett reduced the penalty to $40 million.
Edison spokesman Gil Alexander said late Monday that the company would comment today on Barnett’s decision.
Edison publicly disclosed in 2004 that employees had manipulated customer satisfaction survey results -- an admission that came after an unidentified letter writer complained to senior executives, public officials and the PUC.
The utility, which later discovered that some safety data had been suppressed, offered to pay a $2.5-million fine and to return $49.4 million in performance incentives that were paid or applied for over seven years.
During courtroom-style hearings in late 2006, Edison sought to pin the blame for the fraud solely on lower-level managers and employees. Eleven people were fired and 46 disciplined in a crackdown an Edison attorney called the utility’s “most extensive discipline effort” ever. But that discipline fell well short of senior managers, who Edison said were unaware of the fraud.
Barnett concluded otherwise.
“The evidence is overwhelming that senior management knew of the manipulation and falsification,” the judge wrote. “For seven years . . . some senior management actively encouraged employees to manipulate survey data, and other senior management, who knew or should have known that the data was suspect, filed for and received” the rewards.
Barnett singled out the then senior vice president of the transmission and distribution business unit, the vice president of power delivery, the vice president of regulatory compliance, the director of planning and the manager of customer satisfaction.
Barnett’s decision will become final in 30 days unless Edison or another party to the case appeals the matter to the five-member commission. A commissioner could also seek additional review of the decision.
Mindy Spatt, spokeswoman for the Utility Reform Network, said the San Francisco-based advocacy group was heartened by Barnett’s ruling: “A decision like this sends a strong message to Edison that these kinds of shenanigans won’t be tolerated. And obviously we’re very pleased that the money that they took from customers is going to be refunded.”
The $160 million outlined by Barnett was paid for by Edison customers through their electricity rates from 1997 through 2003. The refund amount includes $83 million in incentives paid to or earmarked for the utility, plus $77 million in rewards paid to Edison employees through a results-sharing program that was based largely on the fraudulent data.
Edison has admitted that overworked employees in its understaffed service planning department erased or changed the phone numbers of unhappy customers to prevent customer satisfaction surveyors from reaching them. In some cases, planners tried to boost scores by replacing customer phone numbers with those of employees’ relatives or others who could be counted on to supply glowing assessments of Edison’s work.
A subsequent probe found that Edison’s customer satisfaction scores could not be justified, and that the utility’s data on first aid and safety incidents were kept artificially low by managers anxious to win bonuses.
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