Los Angeles Daily News

Under pressure from Gov. Gray Davis to bail out the power industry, the state Public Utilities Commission planned to consider today whether to raise rates charged consumers in the face of California’s energy crisis.

Davis’ strategy outraged consumer advocates, who accused the utilities of manufacturing the power shortage as a ploy to raise rates.

Southern California Edison and Pacific Gas and Electric, however, contend that rate hikes are necessary to offset skyrocketing wholesale prices that officials blame on deregulation. Edison has announced it could face bankruptcy without a rate hike, and called for a government bailout.

“The consumers, while having to bear some of the burden, are not going to bear all of the burden,” Davis told a news conference in Sacramento. “There’s no question that everyone has to be part of the solution.”

The state’s power crisis has not affected the city of Los Angeles because the Department of Water and Power has surplus generating capacity — a longtime liability that has become an asset as the city profits by selling excess electricity to other parts of the state.

Much of California’s power grid entered a Stage Two emergency again Wednesday, requiring shutdowns for some large industrial and commercial customers that agreed to cut back or pay higher rates in exchange for paying low rates during normal usage times.

For the second day in a row, the California Independent System Operator invoked U.S. Energy Secretary Bill Richardson’s order for Western power generators to release electricity to California. Richardson said he would extend by a week his order, which was set to expire today.

In another development, consumer groups, left out of the latest negotiations, were invited to attend talks with the Federal Energy Regulatory Commission for setting long-term energy contracts for wholesale energy needed by California utilities.

Consumer advocates accuse the utilities of withholding power to create a false shortage and pressure Davis and the commission into allowing price hikes banned in a deregulation deal in 1996.

“The utilities are creating a stampede, using the threat of bankruptcy as a form of blackmail to force a government bailout,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights, based in Santa Monica.

“If the PUC approves rate hikes, it would be rubber-stamping a back-door deal between Davis and the utilities,” he said. “This would be an economic disaster for ratepayers. Who is going to bail them out?”

Under state law, the first rate hikes would be allowed after March 2002, or once the PUC determines that utilities have paid off certain post-deregulation debts.

The PUC is scheduled to take up the issue today, but action could be delayed if Davis or the Legislature intervenes, said PUC spokeswoman Kyle DeVine.

“The commission is set to discuss the precursors to possible rate hikes,” she said. “But given the urgency of recent events, anything could happen.”

Nettie Hoge, executive director of the San Francisco-based Utility Reform Network, said the financial hardship being claimed by the two utility giants, as well as recent closures of power plants for announced repairs, should be thoroughly investigated in public hearings.

“The parent holding companies should be looked at,” she said, adding that even if a small drop in profits were the case, ratepayers should not be held responsible.

Southern California Edison, which has 4.3 million customers in the Southland, is part of a state-managed grid, but the DWP is not.

“Los Angeles already has one of the highest costs of living in the country,” said Larry Gross, president of the Coalition for Economic Survival. “We’re going to see people choosing between paying the rent or paying their bills. These are the people who are going to suffer the most.”