Utility: Move key to getting state out of electricity-buying business. PUC showdown is expected.

Los Angeles Times

Southern California Edison and Pacific Gas & Electric told state utility regulators that they must be able to sign long-term contracts and pass electricity price spikes on to customers if the utilities are to resume power purchases that the state has been making on their behalf.

The filings, made late Wednesday with the Public Utilities Commission, are a key step in getting the state out of the power-buying business by the end of the year, as required by state law. But the plans appear headed for a showdown with a much more restrictive proposal by PUC President Loretta Lynch. The Lynch proposal addresses only 2003 and would require the utilities to buy power on the spot market, or through contracts that are no longer than one year.

Edison President Robert Foster said Thursday that Lynch’s proposal ties the utilities too much to potentially volatile spot markets and would repeat the mistakes that pushed the utilities to the edge of bankruptcy in January 2001. Pacific Gas and Electric subsequently filed for bankruptcy protection in April 2001. Power sellers refused to deal with the utilities, and the state Department of Water Resources, under an emergency order by Gov. Gray Davis, stepped in to buy electricity for the 10 million customers of Edison, PG&E and San Diego Gas & Electric.

“That is not an appropriate path. It’s a path that could return us to crisis,” Foster said in a conference call with reporters. Edison wants to sign multiyear deals and to begin the process this fall in partnership with the DWR as a transition to negotiating its own deals once it regains an investment-grade rating from Wall Street debt rating firms.

Key to becoming investment grade again is the ability to pass any increases in power costs on to users, Edison said in its filing, which proposed a formula for changing rates without a PUC vote if electricity costs change. Edison is rated BB, two notches below investment grade.

Consumer advocate Doug Heller said such a proposal shifts the risk of volatile prices to customers.

“Edison is using their theoretical need for credit-worthiness in order to pass on all the costs of their deregulation disaster forever,” said Heller of the Foundation for Taxpayer & Consumer Rights.

SDG&E took a different path and advocated that the PUC and the state Legislature postpone returning power purchasing to the utilities for another year so that a comprehensive statewide system for buying power can be developed.

The utility filings are part of a PUC proceeding that is expected to result in a commission decision by early October. Hearings on the matter are scheduled for June.