As an Energy Crunch Continues, California’s Utilities and Their Customers Clash Over Rates

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The New York Times

While California’s governor was in Washington discussing the state’s energy crisis with President Clinton, representatives of dozens of interested parties converged on an emergency meeting here today to debate whether consumers should pay sharply higher electricity rates.

The state’s two largest utilities, the Pacific Gas and Electric Company and Southern California Edison, have appealed to the state’s Public Utilities Commission, which held the hearing, to raise consumer electricity rates by up to 30 percent. Without that relief, they say, they risk going bankrupt.

Consumer advocates said that if users were asked to pay more, utilities should be required to give up something in return.

Douglas Heller of the Foundation for Taxpayer and Consumer Rights told an auditorium filled with more than 150 people that the state’s utilities should be forced to sell nonessential assets, cut expenses — like limousines and first-class plane tickets — and lower salaries of executives to help pay the $8 billion they have been forced to pay wholesale power producers for energy but have not been able to collect from consumers because of a rate freeze that is in effect until March 2002.

Such an idea would have been unthinkable four years ago when California decided to deregulate electricity, hoping a freer market would lead to more competition and lower prices for consumers. But with demand growing and prices rising not only for electricity but also for natural gas, the state’s energy crunch seems to get worse every day.

The mood of today’s hearing was particularly tense as one member of the Public Utilities Commission, Carl Wood, characterized a rate increase as “the end of the legitimacy of deregulation in California.”

Even the commission’s president, the normally polite Loretta Lynch, chastised a lawyer from Southern California Edison when he told her that the utility had already sent out letters to consumers regarding a potential increase, a notice not approved by the commission.

“It is quite astonishing that you would choose to ignore our rules and procedures,” Ms. Lynch told J. P. Shotwell, Southern California Edison‘s regulatory lawyer.

Since the price of electricity shot up to $1,500 per megawatt-hour earlier this month, the debate over energy in California has had a circuslike quality, with various groups clamoring to protect their interests. That was the case today, as consumer advocates, regulation proponents, corporate lawyers and energy executives milled around the crowded room and spilled into the lobby. Pickets lined the sidewalk in front of the building, calling for regulation.

More than 40 participants were given five minutes each to make their case before the commission.

On Thursday, utility executives will be allowed to present their views to the panel. The commission is also auditing the utilities’ financial statements to decide how much of an increase is appropriate.

Assemblyman Fred Keeley, a Democrat from the Monterey Bay area, proposed that the utilities sell their hydroelectric plants to the state, which could sell the power back to them at cheap prices. That, he said, would give the utilities much-needed cash without a rate increase.

But that may be too long-term a solution for some utilities. Roger Peters, general counsel for Pacific Gas and Electric, told the commission today that of the $1.1 billion the utility paid to power producers in November for electricity, the company was still $700 million short after deducting the revenues it received from selling power produced by its own plants.

And late Tuesday, Southern California Edison, a unit of Edison International, sued the Federal Energy Regulatory Commission, asking that it be ordered to force power generators to charge more reasonable rates.

California’s governor, Gray Davis, has been in Washington seeking counsel from President Clinton, with whom he had a 15-minute briefing today, and the Federal Reserve Board chairman, Alan Greenspan, with whom he spent two hours on Tuesday.

Energy Secretary Bill Richardson extended a rarely used emergency order today that required generators and marketers to make power available to California through Jan. 9.

But exactly what Governor Davis, a Democrat, expected to accomplish in Washington puzzled some industry experts who pointed out that Mr. Greenspan, for example, has no authority over energy policy.

“He needs to be meeting with the energy folks,” said P. Gregory Conlon, a former member of California’s Public Utility Commission and a supporter of deregulation.

Consumer Watchdog
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