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National Public Radio MORNING EDITION


California’s two largest utilities have stated their case for sharply raising electricity rates. At a hearing before state regulators, representatives for Pacific Gas and Electric and Southern California Edison warned yesterday that skyrocketing wholesale energy costs have put them on the brink of bankruptcy. From KQED in San Francisco, Peter Jon Shuler reports.


At this point, there’s little doubt electricity bills will go up in California. The question is how much. In convening the two-day hearing on the state’s energy prices, the California Public Utilities Commission had already conceded that a rate hike was coming. Governor Gray Davis, who has been meeting in Washington with President Clinton and Fed Chair Alan Greenspan about the crisis, has been trying to privately negotiate a rate increase with the utilities for two weeks. But at Wednesday’s hearing, utility representatives called for a rate hike far in excess of anything the governor had in mind. PG&E wants a 26 percent increase. Southern California Edison wants 30 percent. Roger Peters is vice president and general counsel for Pacific Gas and Electric.

Mr. ROGER PETERS (Vice President and General Counsel, Pacific Gas and Electric): The question is, what do we need in rates to pay for the power that we’re going to be required to procure on behalf of our customers tomorrow? And tomorrow is the issue because we are out of credit and we are close to being out of cash. So people will not lend us money to buy power and we don’t have the cash to buy it ourselves.

SHULER: In his testimony, Peters blamed energy wholesalers for out-of-control power costs. The utilities say wholesale prices have risen higher than the retail rates they’re allowed to charge during the transition to complete deregulation. But some consumer advocates say the utilities are just reaping what they’ve sown. The state launched its experiment in deregulation four years ago. Competition was supposed to lower prices, but instead, utilities have been squeezed by skyrocketing wholesale prices. Doug Heller, with the Foundation for Taxpayer and Consumer Rights, says it’s time to reregulate the industry.

Mr. DOUG HELLER (Foundation for Taxpayer and Consumer Rights): Deregulation has been an unmitigated disaster in which the power companies and the utility companies have had a chokehold on the consumers of the state. And now, after dipping into our pockets for $ 20 billion in extra charges over the last two years, the utilities have come back to feed at the trough once again and Governor Davis and the Public Utilities Commission seems to be all too compliant and willing to dip into our wallets and lay them bare to the utilities.

SHULER: But opinions on both the rate hikes and the future of deregulation in the state are as varied as they are contentious. PUC staffers privately say untangling the mess is one of the most complex issues the commission has ever faced. Former PUC member Pete Gregory Conlon(ph) helped engineer the deregulation of California’s electricity market in 1996. He told the current members to approve the rate increases to allow time for deregulation to work.

Mr. PETE GREGORY CONLON (Former Public Utilities Commission Member): California needs the lights on. And the only way they’re going to keep them on is to get these utilities viable at least for the next two or three years till we get these 17,000–that’s $ 10 billion of new investment that will be built with those 17,000 megawatts of plants. So trust the system. Don’t throw the baby out with the bathwater.

SHULER: Whether consumers will stand for two or three years of rising electric bills for the future promise of a more efficient energy market isn’t clear. In any case, time is short for the Public Utilities Commission to sort out the conflicting interests. The PUC has said it will decide on the rate increase at its regular January 4th meeting. PG&E and Southern California Edison have warned they will be out of cash to buy electricity for the 10 million homes they serve in a matter of weeks. For NPR News, I’m Peter Jon Shuler in San Francisco.

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