Graduated rate increase would take effect in June

The San Francisco Chronicle

As state regulators outlined plans to raise residential electricity bills by as much as 40 percent, the head of the Public Utilities Commission warned yesterday that power rates could soar even higher.

The PUC, which adopted an increase in March, is scheduled to approve details of the new rates in San Francisco on Monday. Consumers will see the higher rates in their June utility bills.

State regulators say nearly half of all consumers will see no change in their power bills. The remainder will experience rate increases ranging from 3 percent to more than 50 percent, depending on the type of customer and the amount of power used.

The increases would be added to an average 10 percent increase adopted in January.

PUC President Loretta Lynch suggested that rates could rise yet again if wholesale electricity prices continue to surge this summer.

“If the sellers decide to turn up the heat and raise prices, we’ll have to look again at the numbers,” she said.

INCREASE WILL CONTRIBUTE LITTLE

The proposed rate increase would bring in about $5 billion annually — a fraction of the estimated $65 billion California will spend this year purchasing power on behalf of the state’s cash-strapped utilities.

Lynch said she expects the remainder to be made up by issuing bonds. The state Senate yesterday approved $13.4 billion in bonds to help cover California’s power costs.

However, those bonds would not be released until August, by which time California’s energy tab would be billions of dollars higher.

“There’s huge cause for concern that this latest rate increase is a down payment rather than anything close to a final installment,” said Bob Finkelstein, staff attorney for The Utility Reform Network in San Francisco.

The PUC‘s Lynch stressed that while California’s new rate structure would place a greater burden on the state’s heaviest power users, the increases are intended to spread the pain among all consumers.

“Energy is expensive for every hour of every day for every customer,” she said.

LINING UP TO GET PAID

That includes the state Department of Water Resources, which is spending about $70 million a day to keep California’s lights on.

While the PUC is moving to have more money collected from consumers to pay California’s power bills, it has yet to address the thorny question of how the proceeds will be distributed among the various parties lined up for compensation.

The Water Resources Department wants all rate-related revenues to first replenish state coffers, while Pacific Gas and Electric Co. and Southern California Edison Co. insist that they be paid as well for their own expenses.

The utilities’ costs include payments to small power generators that can no longer afford natural gas to run their plants. The recent closure of hundreds of such facilities is a key reason California is experiencing blackouts this week.

Although PG&E said yesterday that most of the smaller generators with which it does business are now back online, it is not yet clear whether the utility will be able to keep paying for their power.

“It appears that everything (from the rate increase) is going to DWR (the Water Resources Department),” said John Nelson, a PG&E spokesman.

Lynch said the PUC will take up the matter of apportioning funds at an unspecified future date.

CONSERVATIVE USE PAYS

For the moment, state regulators have their hands full digesting two competing — and highly complex — proposals for how rates should be increased next week.

One proposal was submitted by an administrative law judge working with the PUC and the other by Lynch. Commissioners will choose between them on Monday.

The two proposals are largely identical. Under both, residential customers who can keep electricity usage within 130 percent of predetermined limits would experience no rate increase.

The “baseline usage” figure — included near the bottom of PG&E bills — represents the minimal amount of power consumers require. It includes a number of variables, such as climate, time of year and type of fuel used.

The PUC said about half of all utility customers statewide historically stay within 130 percent of baseline limits.

Heavy residential users whose electricity usage tops 400 percent of baseline figures would see power bills rise by as much as 40 percent. Heavy commercial and industrial users would see bills rise by more than 50 percent.

The average increase for all PG&E residential customers would be about 16 percent, the PUC said, although this number is skewed by the addition of all those customers whose bills would remain unchanged.

Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights in Santa Monica, questioned whether these rate increases will be sufficient to motivate greater conservation among consumers and thus ease California’s energy woes.

He called instead for the state’s political leaders to seize generating plants from out-of-state power companies and impose a special tax on the companies’ “windfall” profits.

“Unless our elected officials take action, this is just the beginning of our rate increases,” Rosenfield warned.

FEDERAL BUILDINGS IN SIGHTS

One of the main differences between the two rate-increase proposals is Lynch’s inclusion of a “real-time pricing program” for federal agencies.

If enacted, she said, federal buildings in California would be fully exposed to the volatile wholesale power market and would pay whatever California pays to keep the lights on throughout the day.

Lynch denied that this is an effort on the part of California officials to drive home to federal authorities the impact of sky-high wholesale electricity prices.

“It’s just an experiment,” she said.

While California officials have called on federal regulators and the Bush administration to assist the state by capping wholesale power prices, Washington has provided only limited relief to date.

The Utility Reform Network’s Finkelstein complained that the proposed rate increases place a severe burden on residential customers when commercial and industrial users account for the greater percentage of power consumption.

“It was the commercial and industrial customers who were clamoring for deregulation,” he said. “You didn’t hear any calls for deregulation from residential customers.”

Lynch said she was aware that residential users are being asked to carry a high proportion of the load but said efforts to force industrial users to pay higher rates ran into political opposition.