Riverside Press-Enterprise

Utility companies and consumer groups escalated their rhetoric Tuesday as the state Public Utilities Commission prepares to take testimony on electric rate hikes.

If utility customers don’t shell out more money for their power, and soon, they risk blackouts, according to Southern California Edison, Pacific Gas Electric and their supporters.

But if Edison and PGE win a retroactive rate hike from state regulators, as consumer groups fear will happen next week, the two investor-owned utilities could be let off the hook from a gamble they made in the state political arena the mid-1990s.

The commission, which will hold hearings today and Thursday, announced last week that it leans toward immediately ending a retail rate freeze imposed by California’s 1996 electricity-deregulation law.

The size and terms of any rate increase remained unclear, but barring a last-minute reversal on the part of Gov. Davis and the five commissioners, many ratepayers in the Inland Empire who are served by Edison are likely to be paying higher utility bills in 2001.

“Unless the state agrees to take immediate action, power blackouts are likely,” Edison chairman John Bryson said in radio commercials aired in Southern California in recent days.

Bryson said Edison already has racked up a debt of $2 billion under the 1996 law.

“This deficit will cause banks to refuse to lend Edison money to buy wholesale power,” he said.

Edison spokesman Steve Hansen said the $2 billion “is a net figure,” reflecting not only more than $3.5 billion in “undercollections” caused by the retail rate freeze, but also some offsetting gains realized from selling the power Edison generates at recently soaring wholesale prices.

Last week, Standard Poor’s, the rating agency that monitors companies’ financial health, warned that California’s two big electric utilities were on the verge of bankruptcy and risked having their bonds downgraded to junk status unless something was done quickly to reduce losses.

On Friday, Edison canceled its fourth-quarter dividend and announced $100 million in cost-cutting moves, including cuts affecting 400 jobs.

On Tuesday, Davis met with Federal Reserve Chairman Alan Greenspan and Treasury Secretary Lawrence Summers to discuss the state’s power crisis. He later said he simply “sought their advice and guidance” and did not ask the two officials to intervene with the creditors on the utilities’ behalf.

Allan Zaremberg, president of the California Chamber of Commerce, said Tuesday that the PUC ought to end the retail rate freeze and let Edison and PGE charge their customers more.

“First, we had generators refusing to sell these two utilities power because they feared they wouldn’t be paid,” Zaremberg said.

“Now, we have the financial markets saying, `We’re not going to loan you money.’ … We think the PUC needs to respond to that and let the retail price reflect some of the wholesale prices we’ve been seeing.”

Representatives of two consumer groups, however, said Davis and state regulators have been stampeded into granting rate hikes without learning all of the facts on the financial condition of the two utilities and their parent companies.

Susannah Churchill, energy expert for the California Public Interest Research Group, a consumer and environmental group, said the deregulation law has forced consumers to pay the state’s three privately owned utilities nearly $20 billion since 1997.

That money was supposed to extricate the utilities from losing investments, such as nuclear power plants and high-cost purchases they were forced to make of power from alternative energy sources.

“They only want Wall Street and others to look at their supposed losses over the past several months,” Churchill said. “Well, what about the last three years?”

She said state government should consider an emergency loan to Edison and PGE from the state surplus, but not grant rate hikes, until more is known.

Doug Heller of the Foundation for Taxpayer and Consumer Rights, based in Santa Monica, noted that the commission Thursday suggested it would order an outside audit of Edison and PGE’s books.

But Heller scoffed at the move, saying “You don’t audit two $35 billion companies in four or five days. You get only a whitewash.”

He urged delay.

“The two days of hearings will be an effort to justify an unjustifiable rate increase,” he said. “That’s where things appear to be headed.”