California regulators OK huge rate increases for power users

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The Washington Times

California regulators, in a complete reversal, yesterday tossed aside Gov. Gray Davis‘ pledge not to raise consumer electricity rates and approved record rate increases of up to 46 percent for 25 million power customers.

While protesters jeered on the streets of San Francisco, California’s Public Utilities Commission unanimously approved the jolting rate increases – which could raise average electricity bills to almost $100 a month – barely two months after denying a request for increases half that size from the state’s failing utilities.

The commission’s refusal to act on the request earlier this year led to a series of quickly deteriorating events that included three episodes of rolling blackouts and the threat of cascading bankruptcies from the state’s largest utilities to its smallest power generators.

The state in two short months spent more than half its $8.5 billion budget surplus purchasing power on behalf of its failing energy companies and this week was preparing to issue a record $16 billion of debt to finance more power purchases. It had little hope of recouping its rapidly escalating costs without the rate increases, which average 3 cents per kilowatt hour.

Loretta Lynch, the commission’s president and one of three commissioners appointed by Mr. Davis, said the rate increases will be structured to exempt the poorest households and to penalize the biggest energy users in an effort to force energy conservation and prevent extensive rolling blackouts this summer during peak power season.

“An increase in retail electric rates is necessary because without it the state’s electricity system and its economy will be severely jeopardized,” the commission’s five members said in ordering the rate increases. They said they were forced to act by the threat of “bankruptcy or financial collapse of the state’s energy system.”

Mr. Davis sought to distance himself from the rate increases, which will raise about $5 billion a year. A spokesman contended the commission acted as an “independent body,” though the governor appointed a majority of the commissioners and prevailed on them earlier this year not to raise rates.

State consumer advocates and legislators said Mr. Davis and the state’s legislative leaders succumbed to the rate increases because of the rapidly deteriorating outlook, including serious power shortages that are widely predicted for this summer and further big hits on the state’s finances.

“Today’s rate increases will be followed by more rate increases when the next wave of blackouts hit,” said Douglas Heller of the Foundation for Taxpayer and Consumer Rights.

Four demonstrators from consumer groups were kicked out of yesterday’s packed meeting as they attempted to shout down the commissioners. Protesters on the street shouted against the rate increases as they were approved.

The commissioners blamed federal regulators and the Bush administration for forcing their hand by refusing to impose federal price controls on the skyrocketing costs of wholesale power that bankrupted the state’s two largest utilities in the last year and were rapidly depleting the state treasury.

President Bush gave his most emphatic rendition of the administration’s stance in a speech before businessmen in Kalamazoo, Mich., yesterday.

“This administration does not, and will not, support energy price controls,” he said. “Price controls do not increase supply, and they do not encourage conservation. Price controls contributed to the gas lines of the 1970s. And the United States will not repeat the mistake again.”

The rate increases approved yesterday would raise the average bill of Southern California Edison customers by 42 percent to 12.5 cents a kilowatt hour and increase the average bill for Pacific Gas & Electric customers by 46 percent to 10.5 cents a kilowatt hour, according to the Associated Press.

Exact increases cannot be calculated since the commission has not determined how it will tier the system to penalize what Ms. Lynch called “electricity hogs.” Residents currently pay on average $65 a month for electricity.

The increases, which will go into effect in May, raise California rates to among the highest in the country.

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