Rebuke erodes utility’s profit
Like a football team that loses an otherwise well-played game because of penalties, Edison International’s third-quarter profit fell 4.8% after the utility company took a $146-million regulatory hit, in part for falsifying data used to win higher rates.
The largest sanction ever assessed by the California Public Utilities Commission resulted in net income of $439 million, or $1.33 a share, down from $461 million, or $1.39, a year earlier, the Rosemead-based owner of electric utility Southern California Edison said Friday.
The penalties, which included a fine and refunds for consumers, stemmed from Edison’s admission in 2004 that for seven years employees had falsified data -- including rigging customer satisfaction surveys -- to help workers and the company win performance rewards that were paid for by the utility’s customers.
Mindy Spatt, spokeswoman for the Utility Reform Network, a San Francisco-based consumer advocacy group, said she hoped the third-quarter earnings hit would send a message that the company and its shareholders would not soon forget.
“They felt they could profit in excess of what they deserved. They made their bed and now they have to lie in it,” Spatt said.
Edison’s revenue rose 4.3% to $4.11 billion during the quarter.
The company said its 2008 earnings would still meet its previous forecast of $3.61 to $4.01 a share but would now be in the middle of that range rather than at the high end.
Edison shares climbed $2.04, or 6.1%, to $35.23 after the earnings were released.
The regulatory sanctions were barely mentioned during a conference call with analysts the company held to discuss the quarter. The fallout from a weak U.S. economy took center stage.
The continuing credit crisis has led Edison to draw $2.1 billion from four credit lines as a precautionary measure, “even though we had no immediate need” for the funds, said Theodore F. Craver Jr., Edison’s chairman and chief executive.
“We don’t plan to repay these draws until we are convinced the banking market has returned to a more normal operating environment,” he said, adding that the money borrowed was invested in highly liquid securities such as Treasury issues.
Craver added that in the next year the company would rein in capital spending because of the economic slowdown.
“For now we are operating under a capital conservation mode. That means we only intend to commit to new construction projects beyond those currently planned and committed to, if we can be assured of financing,” he said.
Craver said that alternative-energy projects would still move forward.
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