The Sacramento Bee

SAN FRANCISCO — With national focus on California’s electricity crisis growing, Pacific Gas and Electric Co. began notifying customers that it wants to boost their electric bills up to 40 percent by the end of 2001.

PG&E‘s south state counterpart, Southern California Edison, prepared to send notices saying it wants increases of up to 76 percent over two years.

And both companies warned the state Public Utilities Commission on Thursday that even those increases may fall far short of the eventual rate increases needed to cover record wholesale electricity prices.

“The utilities bet on deregulation, and it has failed,” consumer advocate Ralph Nader said after briefly attending the second day of emergency PUC hearings in San Francisco.

Now, because of that “reckless” policy, “utility bills will double or triple” unless the governor and the state Legislature take action, said the former presidential candidate of the Green Party.

“Gov. Gray Davis‘ political career hangs by a few kilowatt-hours,” Nader said. “What happens in California will reverberate … all over the country.”

Nader and other consumer advocates called on Davis, regulators and lawmakers to resist rate increases that utilities say they need to avoid bankruptcy.

But PG&E spokesman Ron Low, calling Nader’s talk of simply letting utilities go bankrupt “irresponsible and dangerous,” said not even bankruptcy would spare California’s consumers at this point.

Someone still will have to pay the wholesale electricity costs, he said. In December, PG&E estimates, those costs were so high that even a modest household bill for 500 kilowatt-hours would have risen from today’s $54 to more than $250 if they were fully passed through in rates.

As utilities continued to push the PUC for emergency rate increases, the governor’s office organized a nearly two-hour telephone conference with utility executives and consumer groups to discuss how California landed in this electricity morass and how it can get out.

Steve Maviglio, a Davis spokesman, insisted the governor was not trying to broker an agreement on proposed rate increases.

“He just wanted to get them talking,” Maviglio said. “There was no stated goal other than to establish a dialogue.”

The call broke little new ground, according to consumer groups and utility officials, but it gave them a chance to confront each other in the governor’s hearing over issues on which they are deeply divided.

The meeting was the third in recent weeks between the Democratic governor and ratepayer advocates, but the first to include the utilities. Several participants said the meeting grew testy at times as consumer representatives challenged utilities’ claims of impending bankruptcy.

“The first thing we all said is that there would be no compromise on a bailout or a rate increase. They are unacceptable,” said Harvey Rosenfield, founder of the Foundation for Taxpayer and Consumer Rights.

“For me, the value was having the chance to put the questions right to (the utilities) and have the governor hear their response,” Rosenfield said.

Consumer advocates contend that utilities have siphoned billions of dollars off to other operations and now hope to sidestep any responsibility for a situation they helped create.

Utilities contend that they were entitled to those billions under the electric industry restructuring law passed in 1996, and that the money cannot be used to offset current skyrocketing wholesale costs.

Maviglio said the governor hopes to hold another meeting with the two sides within a week.

Carl Wood, one of the five appointed PUC commissioners scheduled to vote next Thursday on the utilities’ pleas for rate increases, said he expects the commission will probably approve an increase for extra costs that will pile up in 2001. But it is unlikely to respond to utility calls to back-bill customers for billions of dollars of expenses incurred during 2000, Wood said.

PG&E has asked the commission to let it collect, eventually, more than $5 billion that it contends it paid out for wholesale power in 2000 but couldn’t recoup under frozen rates.

And in a PUC hearing room flooded with lawyers and regulatory specialists, Dorothy Diez, a retired receptionist from San Francisco, reminded commissioners that their decision will touch countless lives.

“Please, please do not raise rates,” she said. “My goodness, I’ll hardly be able to eat.”

Tom Dickerman, a retired civil engineer who is both a PG&E ratepayer and shareholder, said “most ratepayers are poor people … and yet the shareholders, myself included, have never missed a dividend.” He called on utilities to stop paying dividends until they can ensure electric rates are fair for everyone.

Much of Thursday’s hearing focused on how — or if — the PUC can allow some kind of emergency rate increase without opening a regulatory Pandora’s box.

PG&E and Edison want the commission to lift a state-ordered rate freeze. They have argued before that once the freeze is lifted, they will have the right to pass on every penny of wholesale costs to consumers without any more input from the PUC.

PUC President Loretta Lynch questioned utility and consumer lawyers sharply Thursday on what legal justifications they see for imposing some kind of emergency rate increase while leaving the freeze in place.

In an indication of where her preferences may lie, Lynch told the utilities that she was not interested in devoting time during the hearing to their arguments for lifting the freeze.

Lynch and Wood, both Davis appointees, were sometimes abrupt with utility lawyers, and Wood pressed them on why they have not sued the owners of the power plants and traders who they blame for skyrocketing prices.

PG&E attorney Chris Warner responded that litigation is “actively being looked at” — an answer that did not impress Lynch.

“It is appropriate for the commission to ask, ‘What have you done to help yourself?’ and the answer was a lot of talk and no action,” she said during a break in the session.

State Sen. Debra Bowen, D-Marina Del Rey, who chairs the Senate Energy Committee, urged the PUC to revise rate structures to charge big household electricity users far more than those who are power thrifty.

She also urged the commission to remember that since 1998, utility shareholders have “benefited to the tune of about $18 billion” because rates were frozen at an artificially high level as part of electric restructuring.

It was a note Nader also sounded, saying such bailouts, followed by a request for more, proves that the state should abandon deregulation and create a public power agency.

The “sterling” performance of both the Los Angeles Department of Water and Power and the Sacramento Municipal Utility District shows that public power “places human need above corporate greed,” Nader said.

Originally scheduled to run for two days, the emergency rate hearings will continue today and probably Tuesday.