Edison rates to remain high under utility’s deal with state

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The Associated Press

Consumer advocates warn that Southern California Edison customers, already saddled with last spring’s record rate increase until 2003, could face even more rate hikes in the months ahead.

The deal secretly negotiated with the state Public Utilities Commission this week settles a lawsuit filed by Edison last November and is designed to keep the utility from following Pacific Gas and Electric, the state’s largest utility, into bankruptcy.

It lets Edison pay off more than $3 billion of a $3.9 billion debt, in part by forcing ratepayers to continue paying higher rates imposed last May for at least the next two years.

Consumer advocates, however, said Wednesday that other consequences of the state’s power crisis could send rates higher still.

The state’s power-buying agency has yet to announce exactly how much money it needs from utility customers to repay the state for the billions of dollars it has spent buying electricity this year and to pay for about $43 billion of long-term power already contracted for delivery.

The prospect of continuing to pay higher rates and possibly enduring even more price hikes in the future dismayed some Edison customers.

“We can’t stay in business,” said William Ho, general manager of Top Hat Cleaners in West Hollywood, where the monthly electric bill has gone from $600 before the state’s energy crisis to nearly $1,200. “We would have to raise prices, and we’re already heading into a recession.”

Ho said Top Hat has tried to cut back on electricity use by shutting off display lights in the windows. But he added, “You can’t press clothes in the dark.”

It’s unclear how much more money ratepayers will be called upon to contribute without knowing how much the state needs to pay billions of dollars in power-buying costs, said Nettie Hoge, executive director of The Utility Reform Network, a San Francisco-based consumer advocacy group.

Hoge and other consumer advocates said this week’s deal amounts to a ratepayer bailout of Edison, which supported the state’s failed deregulation plan.

“It’s like saying I’m not going to beat you any harder, so it shouldn’t hurt,” she said.

John Bryson, Edison International president and chief executive officer, said the settlement would help the utility restore its good credit and repay its creditors.

Edison owes nearly $4 billion to hundreds of power companies, ranging from energy marketing giant Enron Corp. to the state Independent System Operator, manager of the state’s power grid.

“The agreement means stability, predictability,” he said during a conference call with reporters Wednesday. “It means preserving and enhancing the infrastructure of electricity that makes the economy of our region work.”

The PUC said the agreement would help the state begin pulling away from its role as a power-buyer. Commission President Loretta Lynch said the agency had little choice in figuring a way to let Edison repay its debts and avoid bankruptcy.

“I think that this is a balanced compromise, but clearly it does allow ratepayers to pay off some of the back debt,” she said.

The state Department of Water Resources so far has spent $9 billion buying electricity for customers of Edison, Pacific Gas and Electric Co. and San Diego Gas and Electric Co.

The shareholder-owned utilities suffered huge losses by being unable to pass along soaring wholesale power costs to their ratepayers. The state’s 1996 deregulation law imposed a price cap on energy rates paid by customers.

That price cap was the focal point of Edison‘s lawsuit against the PUC, with the utility contending the state had no right to prevent the utility from passing the cost of energy to its customers.

Under the deal struck this week, Edison also must direct its available cash and an estimated $1.2 billion it would have issued in shareholder dividends toward paying its debt. The utility could be due refunds ordered by federal energy regulators, and that money also would have to help pay down the debt.

The agreement now goes before U.S. District Court Judge Ronald S.W. Lew in Los Angeles, who could rule on it this week.

“Right now Judge Lew has his hands in the pockets of ratepayers. … Will he pull out $3.3 billion for Edison or will he protect the working men and women of California who can least afford to pay a superfluous bailout tax?” said Douglas Heller of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, which organized a protest rally Wednesday outside the federal courthouse in Los Angeles.

Heller estimated the settlement could cost Edison ratepayers $750 each over the next four years.

Consumer Watchdog
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