Edison Settles Dispute Over Power Rates : * Utilities: The company agrees to pay ratepayers back $250 million and pledges not to buy electricity from affiliated companies whose rates were deemed excessive.

Customers of Southern California Edison could see a slight decrease in rates as a result of a $250-million settlement with the consumer advocacy arm of the California Public Utilities Commission over Edison’s purchase of power from an affiliated company.

Because of the settlement, the Rosemead-based utility said Friday, it is adjusting its third-quarter earnings down 15%.

Edison has provided an additional $74 million in reserves to cover the cost of the settlement, which reduced third-quarter net income by $44 million, or 20 cents a share. The restated net income for the quarter is $248.3 million, or $1.14 a share, compared to $286 million, or $1.31 a share, in the third quarter of 1990.

After months of negotiations, Edison agreed not to enter into power purchasing contracts with companies partly owned by the affiliate, Mission Energy Co., and to compensate consumers for the disputed cost of the contracts.

The Division of Ratepayer Advocates of the PUC had charged that Edison had favored its sister company over other projects at the expense of ratepayers, while Edison contended that the 13 contracts were at prices favorable to its customers.

One consumer group speculated that the settlement might be too small given the size of a previous disallowance--$48 million--on only one of the contracts under dispute. The agreement has been approved by Edison’s board but still must go before the PUC, which is not expected to rule until next year.

Under the settlement, Edison’s 4 million customers would receive a $120-million credit and be compensated in the future with discounted prices paid over the remaining of the contracts, which range in length from 14 to 27 years. In all, the settlement is valued at $250 million.

The initial credit would translate into a 1.5% reduction in the average bill, or a cut of slightly less than $1 a month per $59 average bill, an Edison spokesman said, assuming that the credit is recorded at the beginning of 1993. The remaining $130 million would make itself felt over several years, he said.

Edison also agreed not to enter into new power purchase contracts with projects partly owned by affiliates. It said it negotiated the contracts in 1984 and 1985 as part of its effort to support development of alternative energy projects.

“We think it’s a good deal for ratepayers,” said Edmund Texeira, executive director of DRA. “It will clearly protect them from future increases, and the effects will be pretty long term.”

John E. Bryson, Edison chairman and chief executive, said the settlement is “beneficial to all concerned.”

“The alternative to this settlement was years of litigation focusing on events of the past rather than opportunities of the future,” Bryson said. “We believe this is a reasonable settlement.”

But the head of a consumer group that raised the issue as part of the now-abandoned merger proposal between Edison and San Diego Gas & Electric said he thought that the settlement was “a little low” because of the $48-million disallowance recommended in connection with Edison’s power purchases from Kern River Cogeneration Co.

“The $48-million KRCC recommendation was really the tip of the iceberg,” said Michael Shames, executive director of UCAN (Utility Consumers Action Network). “We would expect to see the same abuses” in the other 12 contracts.

“My expectation is that the settlement agreement will have to withstand scrutiny from consumer groups,” Shames said. “I don’t know if it’s a done deal.”