Contra Costa Times

SAN FRANCISCO _ Calling it the beginning of a ratepayer revolt, consumer activists descended on state regulators who approved a massive electricity rate increase on Tuesday and said they would eventually go to voters to try to get the price hikes reversed.

Activists disrupted the Public Utilities Commission several times, chanting slogans such as, “Rate hikes no way, make the energy companies pay” before the commissioners approved a rate increase of 3 cents per kilowatt-hour and made permanent a 1-cent per kilowatt-hour charge that was adopted as a temporary measure in January. Taken together, electricity rates for customers of Pacific Gas & Electricity will increase by 42 percent over last year.

Three protesters were escorted out by police during the two-hour long meeting.

“Today marks the beginning of the ratepayers’ revolt,” said Medea Benjamin, a one-time Green Party candidate for U.S. Senate who was among those escorted out. “This is not legal and consumers should not pay the rate increase _ not one cent.”

The increase, which regulators said would likely appear on consumers May bills, will apply to electricity used beginning Wednesday.

In a series of three decisions that appeared to please no one, the commission raised rates and ordered the state’s utilities to pay alternative energy companies and the state treasury, which is being tapped since January to buy electricity at about $50 million a day.

But numerous details were left undecided, including how the rate hike would be distributed among electricity consumers and exactly how much alternative energy companies or the state will be paid.

Pacific Gas & Electric executives said the commission’s action might actually worsen the energy crisis.

Soaring wholesale electricity prices and frozen retail rates have nearly broken the state’s utilities and are now draining the state treasury.

Meanwhile, alternative energy companies, who have not been paid for power dating back to the end of last year, began shutting down their power plants in recent weeks and contributed to two days of rolling blackouts last week.

All that, combined with dire predictions about the price and availability of power this summer, have made rate increases appear more and more inevitable in recent weeks.

But the PUC‘s decision to hike rates nevertheless unleashed a predictable backlash that could intensify. The outcome could determine the future of California’s energy market and the political future of a governor who has presidential aspirations.

Consumer groups said they would file lawsuits, and they called on Davis to follow through on his suggestion in January’s state of the state address that he was willing to seize power plants if necessary.

They are also planning ballot initiatives.

“I would stand on that corner out there and qualify an initiative in two days,” Nettie Hoge, director of the Utility Reform Network, said outside the PUC building shortly after the vote.

“There’s never been this much interest in this issue in California,” Hoge said.

The Foundation for Taxpayer and Consumer Rights, headed by influential consumer rights activist Harvey Rosenfield, plans to ask lawmakers and the governor to overturn the rate increase.

If that fails, they will attempt a ballot initiative that would order refunds, impose a windfall profits tax on energy companies and re-regulate the electricity market, according to foundation spokesman Doug Heller.

Many observers believe an initiative would also hurt Gov. Gray Davis‘ re-election chances next year.

“In the face of the largest rip-off in California history, our governor is saying put in and shut up,” Heller said.

Like many consumer advocates, Heller was highly critical of Davis, who maintained as recently as Monday that it was his “hope and expectation” that there would be no need for a rate increase.

But Davis, who has occasionally offered other assurances, softened his stance on Tuesday.

He called the PUC‘s action “premature” because the Department of Water Resources has yet to submit its financial requirements to pay for electricity.

Still, he indicated he might support the rate increase.

“While I have opposed rate increases, if it becomes clear that a rate increase is absolutely necessary for the good of the state, I will support one that is fair and do my duty to convince Californians of its necessity,” Davis said.

Davis aides on Tuesday reiterated that neither Davis nor his staff communicated with PUC officials in advance about the rate hike ordered on Tuesday.

The commission still must decide who will get hurt most by the rate hike, although current state law ensures that those who use less than 130 percent of their PUC-calculated baseline allocation are protected from rate hikes. That is nearly half of the customers of the state’s three utilities. Low-income consumers are also expected to be exempt.

PUC President Loretta Lynch unveiled a tiered rate structure this week that, if adopted, would result in the bulk of the increase falling on those who use twice their baseline allocation. She said she hopes the commission finalizes a new rate structure in four to six weeks.

Neither utilities nor power companies representatives were pleased.

PG&E officials were angered, especially by a key change in accounting rules adopted in the flurry of activity that will delay the point at which the entire wholesale cost of electricity will pass to retail customers. Since the company maintains under the old accounting rules that the rate freeze should have lifted last year, utility customers would be on the hook for up to $8.2 billion in losses incurred through January.

PG&E president Gordon R. Smith said the PUC‘s actions, “do not resolve any of the key issues facing California’s policymakers during the energy crisis” and could “even create more instability.”

Southern California Edison also wants to recover those losses, but was generally more positive.

“We believe we have a legal right to recover those costs incurred on the wholesale power market,” said Edison vice president Bruce Foster. “But this is a step in the right direction.”

A representative of the alternative energy companies said the so-called qualifying facilities will be glad to get paid but they are unhappy with a part of the PUC‘s order that is expected to lower the price in their contracts.

“It’s going to be uneconomic for many qualifying facilities to produce energy,” said Dave Fogarty, spokesman for the Western States Petroleum Association. “This does not solve the problem. It probably makes it worse.”