PG&E, Edison seek OK to bill consumers for price-hike debt

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San Diego Union Tribune

The crisis caused by electrical deregulation — which has blown budgets across San Diego — is now leading Southern California Edison and Pacific Gas & Electric to press for approval to back-charge their customers more than $4 billion for this summer’s price run-up.

The back-billing by the two utilities would wallop nearly 9 million state consumers with the same increases that have jolted SDG&E‘s 1.2 million customers, whose bills more than doubled over the summer. The utilities also want to begin billing their customers market prices for power in the future.

Consumer advocates say the proposals from PG&E and Edison would amount to a violation of California’s deregulation law and provide another bonanza for power companies at the expense of consumers.

Unlike San Diego Gas & Electric Co., PG&E and Edison continue to operate under a price cap mandated by the state’s 1996 deregulation law and are unable to pass along to their customers the full cost of buying electricity.

The debt for covering the gap between what the utilities pay for power and what they collect from customers soared to $4 billion over the summer, the companies said.

Edison said yesterday that it will ask the California Public Utilities Commission to allow it to end the price cap for customers so it can recover its nearly $2 billion debt.

Under terms of the deregulation law, price caps for power customers end when utilities are repaid for past investments. Edison said yesterday that it has agreements in hand which will bring it to that point.

PG&E is also pressing for lifting the consumer price cap. This was not expected to occur until 2002.

An Edison spokesman said changes are needed now because a key condition for deregulation is not in place.

“One of the fundamental precepts is that the markets would be workably competitive,” said Jim Scilacci, chief financial officer of Southern California Edison. “This market is broken.”

Until recently, the price caps allowed utility companies across the state to collect billions for their past investments.

Until June, the rate cap yielded Edison and PG&E an amount estimated at $14 billion to $18 billion for their “stranded costs,” which are nuclear plants and other assets that the utilities say became uncompetitive when California deregulated its power market.

The utilities collected billions because the capped price paid by customers was set above the price the companies paid for power, allowing PG&E, Edison and SDG&E to pocket the difference.

As electricity prices rose beginning in June, however, costs surpassed the price cap, and the companies say they have had to borrow to cover the difference. Bond raters recently became alarmed that these debts might become unmanageable and raised credit warnings for California’s major utility companies.

Others say the situation may be more ambiguous than the growing mountain of debt described by the utilities.

Loretta Lynch, president of the Public Utilities Commission, said a fuller accounting was required before the commission would consider action.

“They are hurting, that is clear,” Lynch said. “But all the utilities have retained (generating plants) from which they are also making money. So you need to net out the costs of buying power against the revenues before we talk about a problem.”

Lynch said the utilities also have benefited from the rapid repayment of their investments under deregulation with the costs recovered in less than five years, instead of the decades that would typically be required.

But Lynch agreed that California’s wholesale electricity market is broken and needs fixing.

Nettie Hoge, executive director of TURN, a Bay Area-based consumer group, said the utility company proposals would be a “flagrant” violation of AB 1890, the state’s deregulation law.

“They grabbed billions by charging customers above-market prices during the ‘transition period’ they wanted,” Hoge said. “Now, they are coming back to the politicians for more, but the public is watching and will not stand for it.”

TURN, along with the Santa Monica-based Foundation for Taxpayer and Consumer Rights, yesterday unveiled what was called a “ratepayer protection pledge” directed toward all California political candidates. The pledge seeks a commitment from politicians not to support attempts by SDG&E to charge increased rates to make up for shortfalls under the rate deferral plan, as well as pledges to oppose measures such as those requested by PG&E and Edison.

“The rest of the state is in the same boat as San Diego,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights.

“The utility companies handing money to the politicians got us into this mess. (Now) it’s time to have the utilities pay for their own mistakes.”

Consumer Watchdog
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