Calif. electric rates may rise

Top power regulator pushes for 40% jump

March 27, 2001|By LOS ANGELES TIMES

SAN FRANCISCO - Millions of Californians would see electricity rates rise by as much as 40 percent under a plan presented yesterday by the state's top power regulator.

Loretta Lynch, president of the Public Utilities Commission, called rate increases necessary to raise cash and encourage conservation. Her plan would charge some customers of the state's two biggest private utilities 3 cents more per kilowatt-hour, depending upon how much electricity they consume. The higher cost would show up in May power bills.

Lynch promised to target the increases on heavy users of electricity and spare nearly half of residential customers from paying more. The rate increases would affect customers of Southern California Edison and Pacific Gas & Electric, which serve 24 million people.

Lynch's proposal drew fire from consumer advocates, sighs of resignation from lawmakers and enthusiasm from Wall Street. Stock prices for both companies jumped by nearly one-third.

For renters and homeowners, the proposal could cost as much as 40 percent more per month. Business customers - who now pay lower rates - could see even higher increases. The latest proposed increase would come on top of an average 10 percent boost for all users imposed in January. An additional 10 percent increase for residential and small-business users is already scheduled for this time next year.

"We recognize the utilities are in severe financial distress," Lynch said. "For utilities to keep the lights on, we unfortunately came to the conclusion a rate increase was needed."

The commission is scheduled to vote on the proposal today, and it is almost certain to win approval, according to commissioners. "I think it will pass," said Geoffrey Brown, recently appointed to the commission by Gov. Gray Davis.

Davis, who appointed three of the five commissioners, distanced himself yesterday from the PUC action, saying that it is an independent body. He repeated that it is his expectation that rate increases can be avoided.

"I've not seen enough information to persuade me we need a rate hike," the governor said.

If the new rate increase measure is approved today, Lynch said, it will be refined in the 30 days it takes the utilities to change their billing processes. She said she cannot finalize the proposal until she gets more information about power supply and cost projections from the California Department of Water Resources, which began buying electricity on behalf of the nearly bankrupt utilities in mid-January. That is when some generators refused to sell to the utilities for fear of not getting paid.

The utilities have been bled by wholesale electricity prices that have topped 10 times the levels of those a year ago.

Rising demand for electricity across the West plus flaws in the design of the deregulated market California opened in 1998 have allowed sellers of electricity to earn substantial profits. Since the state stepped in to buy electricity for the utilities, it has spent roughly $3 billion covering roughly 34 percent of the state's power needs.

While Davis has adamantly resisted rate increases, other politicians have come to call them inevitable. The state and utilities need a deeper cash flow to cover wholesale power costs expected to soar again this summer, they say. And rate increases will serve another critical purpose, they say, by prompting Californians to switch off lights, buy efficient refrigerators and shut down hot tubs. Such conservation will be key to whether the state avoids blackouts, grid operators say.

Consumer groups immediately attacked the proposal.

Jason Zeller, an attorney with the independent Office of Ratepayer Advocates, expressed worry about the PUC's speed in acting on the proposal. "Customers had no notice that they would be socked with the largest rate increase in California history," he said.

"This decision is a roll of the dice that 3 cents is enough," he said, noting that the PUC cannot predict the future cost of power.

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