Electric utilities may be charging consumers more than $10 million a year for the Washington lobbying expenses of the industry's Edison Electric Institute, an official of the National Association of Regulatory Utility Commissioners has charged.
Michael Foley, the association's director of financial analysis, said that passing on such expenses to consumers violates the laws of most states.
Foley has been conducting an on-site investigation of Washington-based EEI's books on behalf of the association, which is composed of commissioners from state regulatory bodies. Its purpose: to determine how much of EEI's overall budget goes toward lobbying the federal government.
"It is clear to us, based on a rather probing analysis of their expenditures, that the principal thrust of the Edison Electric Institute's activities is that of attempting to influence the affairs of the federal government," he said. "The majority of the dues received from utilities are directed toward that goal."
EEI, an association of about 175 investor-owned utilities with a staff of about 290 people, does legislative and regulatory work for its members, researches and gathers statistical information, and helps electric companies generate and distribute electric energy at the lowest possible prices.
EEI collects dues from utilities that go toward running the association itself, said EEI spokeswoman Mary Kenkel. Last year, $26.3 million was collected, and most of that was passed on to member utilities' ratepayers.
Foley's preliminary estimate, after examining the EEI budget book, financial statements, tax returns and vouchers for the hiring of outside consulting firms, is that a "clear majority" of the dues the trade group collected last year has gone toward influencing the federal government.
"That ratepayers do not fund utility political advocacy expenditures is a statute in most state codes," he said.
The Edison Electric Institute has called the charges of using most dues for lobbying "not true" and "a clear mischaracterization." The debate has become more heated in recent months because of growing concern among state regulators that ratepayers not fund activities that are not directly in their interest.
Richard Braatz, vice president of finance and regulation for EEI, said, "There are all kinds of red herrings these people drag out. If there is any indictment to be made, it is an indictment of misunderstanding and not of dishonesty or uncooperativeness."
Regulatory association members "have been in to audit the accounts. They have not completed their review -- that statement is unsubstantiated and it is premature," said Braatz. "If the review in fact shows that, that is fine, but they are approaching this without an open mind."
The trade group has been involved in low-income assistance programs, hydroelectric plant relicensing and other projects that benefit consumers, said Kenkel. "We believe we work to support consumer interests," she said.
The trade group also collects money from utilities that want to contribute to a cleanup program for Three Mile Island, to other industry groups affiliated with EEI and to its media communications fund -- used for advertising, promotion and other functions.
Last year, EEI collected $28 million for that purpose. The group also collected $265.2 million on behalf of the Electric Power Research Institute, a California industry research arm. (Starting in 1986, utilities will pay that institute directly.) Benefit to Ratepayers Questioned
While stockholders may fund a portion of EEI's programs, ratepayers pay the majority of utility dues and also pay for some other EEI programs through charges passed on to them by the utilities, according to the National Association of State Utility Regulators.
Although the dues themselves may amount to only pennies in a ratepayer's bill, they give EEI a powerful industry voice that may not be in the best interests of ratepayers, regulators and consumer advocates say.
"EEI regularly . . . lobbies federal agencies such as the Federal Energy Regulatory Commission, the Department of Energy, the Environmental Protection Agency and the Nuclear Regulatory Commission for policies and rulings favorable to the utility industry," said Richard E. Morgan, an economist with the Environmental Action Foundation, a Washington advocacy group.
"EEI frequently takes positions which are detrimental to utility consumers, such as favoring higher utility rates and weaker environmental and safety regulations," he said.
Andrew Varley, who sits on a regulatory association committee overseeing the audit of EEI, said, "Their primary purpose is to represent the private utility industry, and I don't believe ratepayers should be required to pay those costs."
EEI members say the dues paid by utilities do directly benefit ratepayers.
"We feel there are a number of advantages to belonging to the Edison Electric Institute that benefit ratepayers," said Tom Welle, a spokesman for Potomac Electric Power Co. (Pepco).
Those benefits include "research results and the fact EEI can gather and analyze federal legislation that would cost us a considerable amount of money to do," he said. EEI also provides utilities information about data bases and about how to run themselves more efficiently, he said.
Critics of the system, however, feel that at the least, an accounting mechanism should be devised that state regulators can use to determine how much of the money local utilities pay justifiably can be passed on to ratepayers.
Braatz said the Edison Electric Institute, which was asked to provide information to the regulatory association two years ago about its budget, has been trying "desperately" to follow accounting methods the association itself prescribed. The new accounting method is meant to provide state regulators with a guide to use in deciding who should pay EEI expenses
"We have done everything to meet the definitions. We've had Price Waterhouse audit our proceedings, we have let the National Association of Regulatory Utility Commissioners in, and that review has not been completed yet," he said.
EEI maintains that, under the Federal Regulation of Lobbying Act's definition of lobbying, only 2 percent of its overall budget goes toward lobbying activities.
In 1982, and again in 1984, in response to requests by the association, EEI expanded the definition to include more "legislative advocacy" activities, such as staff expenses and time spent in preparation of legislative positions and publications, grass-roots advocacy and costs of administration of the EEI political action committee, said Kenkel. Under the expanded definition, about 20 percent of the dues it collects could be attributed to lobbying and "legislative advocacy," she said.
However, state laws vary, and in many instances define the term lobbying more broadly, Foley said. The regulatory commissioners' association maintains EEI is "substantially underreporting the amount of money they devote to those types of activities."
The association is investigating not just what the dues are used for, but also the purpose served by other groups EEI funds -- such as the Utility Air Regulatory Group, the Utility Nuclear Waste Management Group and the Utility Solid Waste Activity Group. Pepco, which contributes to some of the groups -- and passed expenses on to ratepayers in 1984 -- said the groups "respond to federal legislation after it is passed." Dispute Over Budget Ongoing
The dispute over EEI's budget has been going on for several years, say regulatory commissioners and officials. Regulators became interested in EEI after a series of ads they say did not put the group in the best light, and after confusion over Edison Electric Institute's financial relationship to a pro-nuclear group called the U.S. Committee for Energy Awareness, Foley said. Initially, the association sent letters to EEI asking that it clarify its budget. While EEI says there has been some "bumpiness" in trying to figure out what information regulators want, the association contends EEI has been less than cooperative.
"I don't think there was any question that EEI ever enthusiastically responded to this issue," said Susan Knowles, an Alaska public utilities commissioner and president of the regulators' association.
Next, the association set up a committee and drafted categories that it wanted EEI to follow in drawing up its budget. The result was not satisfactory, the association has said. A 1984 Price Waterhouse audit found that 19 percent of the group's expenses went toward different legislative, regulatory and advertising categories, and the rest fell into an "all other operating expenses" category.
Both EEI and the association are now working on devising new definitions that EEI could use in drawing up its 1985 budget.
The regulatory association's "responsibility is to make sure that we are reporting our expenditures in a format that can be shown to various state commissions. We understand that," said EEI's Braatz.
Said the association's Foley: "The process takes time, but I am convinced justice will be administered in this matter."