Regulators Say Increase Is Necessary to Keep Utilities Solvent

The Washington Post

SAN FRANCISCO, Dec. 21 — In the strongest sign yet that millions of Californians will soon be paying sharply higher electric bills, state utility regulators said today that consumers should pay more to keep the state’s largest electric companies from going bankrupt.

“We believe that retail rates in California must begin to rise. It’s our intent to maintain the utilities’ access to capital on reasonable terms,” said the Public Utilities Commission, which ordered an independent audit of the utilities’ books before it formally decides whether to lift a rate freeze.

PUC Chairwoman Loretta Lynch said the new rate increase — its amount is still unknown — would take effect Jan. 4 and show up on consumers’ bills shortly thereafter.

Pacific Gas and Electric Co. said it would raise bills gradually to “protect the consumers against rate shock.”

In private negotiations with Gov. Gray Davis (D) and other key politicians and regulators, the utilities have asked that customers pay for 20 percent or more of the companies’ debt.

Before making any such deal, the PUC wants to confirm just how bad the financial picture is for PG&E and Southern California Edison Co., which together have taken on more than $8 billion in debt buying energy on the open market, but are constrained by a rate freeze from passing the costs on to consumers. San Diego customers, who are not covered by the rate freeze, have seen their bills double or triple.

The PUC‘s action requires the utilities to open their books to independent auditors and financial analysts selected by the commission. The audits were scheduled to begin Friday morning.

The PUC will hold emergency public hearings next Wednesday and Thursday on the utilities’ finances, allowing consumer advocates, utilities and power producers to have their say on the rate increases.

Consumer advocates say the crisis has been manufactured, and denigrated Standard & Poor’s warning Wednesday that the utilities could lose their credit rating and no longer afford to buy power. They likened it to financial blackmail, designed to scare Davis and the PUC into approving higher rates to protect the interests of investors.

“Wall Street seems to think that every time a big company gets into trouble, there has to be a bailout by the customers or taxpayers,” said Harvey Rosenfield, executive director of the Foundation for Taxpayer and Consumer Rights, a watchdog group in Santa Monica.