The effects of Southern California Edison’s settlement

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The Associated Press

Q: What does Edison‘s proposed settlement with state regulators mean for customers?

A: If U.S. District Court Judge Ronald S.W. Lew approves it, customers should not see any change to their power bills or a change in service. The Public Utilities Commission, Gov. Gray Davis and Edison officials say the settlement should prevent the utility from following Pacific Gas and Electric Co. into bankruptcy court. That would prevent other groups from taking control of electric rates away from the state Public Utilities Commission. Rate requests from Edison would continue to be subject to PUC approval.

Q: Will rates rise for Edison customers?

A: That depends. The PUC and Edison claim the settlement will not raise rates because it allows Edison to extend higher rates the PUC approved in May over as many as four years. However, consumer groups and lawmakers say the settlement was made without knowing how much the state Department of Water Resources will require ratepayers to contribute to help repay the state general fund. The water agency this year has spent $9 billion buying electricity for customers of Edison, PG&E and San Diego Gas and Electric Co. The state also plans to spend about $43 billion to buy electricity over the next two decades, which could require consumers to pay more money than current rates can supply to the state.

The state entered the power business after the utilities lost their good credit ratings and could no longer buy power on their own.

Q: What does this mean for PG&E and SDG&E customer?

A: Rate hikes state regulators imposed on Edison and PG&E in the spring remain at the same levels to help the state pay off the billions it has spent buying electricity.

For PG&E customers, that means electric rates are 37 percent higher on average for residential customers who use the most power. Commercial customers pay 38 percent more, industrial customers pay up to 49 percent more, and agricultural customers pay 15 to 20 percent more.

For SDG&E ratepayers, last month’s rate hikes are just going into effect. Residential customers will pay an average of 12 percent more, small businesses will pay 13.7 percent more, medium to large businesses will pay 18.5 percent more, industrial customers 19 percent more and agricultural customers 14.4 percent more.

Customers who stay within 30 percent of their baseline allotments or who are enrolled in the California Alternate Rates for Energy program were exempted from rate hikes.

Q: What is Edison‘s debt now?

A: Edison officials have said the utility owes about $3.9 billion to several hundred creditors, including large power companies such as Houston-based Enron Corp. and small power plants fueled by wind and solar energy who were not fully paid for power deliveries. The settlement will allow it to collect about $3.3 billion, which should help restore its good credit. In turn, that should help the utility borrow money to pay off the balance of its debts. The utility sank into debt because a state-imposed rate freeze prevented it from passing along soaring wholesale power costs to its customers.

Q: Why don’t consumer advocates and some lawmakers like Edison‘s deal with the PUC?

A: Consumer groups, such as The Utility Reform Network and The Foundation for Taxpayer and Consumer Rights, say they are angry that the PUC and Edison negotiated the deal in secret. Gov. Gray Davis had ordered the Legislature to return next week to craft a rescue plan for Edison but canceled the session after the deal was announced Tuesday.

Consumer groups call the settlement a bailout for Edison and say consumers should not be forced to pay for the utility’s mistakes. Edison was one of the loudest proponents of the state’s effort to deregulate its electricity market and open it to competition.

Q: Will this prevent Edison from going into bankruptcy?

A: Several major creditors, including Enron Corp. and Mirant Corp., are threatening to push Edison into involuntary bankruptcy, sending a letter to the utility last weekend requesting a payment plan for the hundreds of millions of dollars the utility owes them. Under federal law, any three creditors can force a company to file for bankruptcy if they are owed a combined $10,775.

Consumer Watchdog
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