City News Service

Southern California Edison said today a proposal by the California Public Utilities Commission president to raise electric rates by

nearly 50 percent to help pay the state’s power bills falls short of the mark.

Rosemead-based SCE, one of the state’s big three investor-owned utilities, has been struggling to keep afloat financially for months. Under deregulation, it is forbidden to unilaterally up the rates to cover the soaring cost of

electricity.

The Edison International subsidiary said its ”highest goal remains the restoration of creditworthiness, so that it can provide safe and reliable electricity service to its customers.”

SCE said the proposed decisions by CPUC President Loretta Lynch recognize ”the absolute necessity of addressing the disparity between very high wholesale power costs and frozen retail rates.”

”However, a cursory review of the multiple complex proposals suggests that substantial improvements will be needed if they are to fully align costs with rates and restore the creditworthiness of the state’s utilities in the eyes of the financial community.

”For example, several elements of Lynch’s plan are not conducive to meeting these objectives. Collection of the increased revenues must be structured in such a way as to assure that costs incurred will be fully recovered through a mechanism which allows for flexibility to meet unknown future shifts in the costs of generation.

”Moreover, the proposed retroactive change in the accounting rules which date back over three years and govern the current market transition would only serve to add complexity and uncertainty at a time when the opposite is required to restore the confidence of the financial community.”

SCE said it agrees with Lynch that ”it is time to pay the state’s power bills, (but) the commission must take measures that clearly give utilities the tools to do so and fulfill our core mission.”

Lynch said the rate increases, which could take effect almost immediately, will be structured so that large energy users, including residential consumers, will pay the most. The idea, she said, is to force conservation.

The state Constitution empowers the commission to set the rates SCE customers pay, as well as those of San Diego Gas & Electric and San Francisco- based Pacific Gas & Electric. Together, the three utilities supply power to 85 percent of the state’s population.

The Los Angeles Department of Water and Power has its own generating facilities and is not anticipating outages or increased rates.

”We need to move forward, and the PUC has substantial evidence (to justify a rate hike) that it didn’t have 90 days ago,” Lynch told the Los Angeles Times.

Three of the five members on the commission — including Lynch — are appointees of Gov. Gray Davis, and it appears likely that Lynch has enough votes for a rate increase, The Times reported.

Lynch said the size of the rate hike would depend on detailed information showing the cost of the state’s power purchases and the supply of electricity. Pressure has been building on the governor to increase rates, which could ease what threatens to become a state financial crisis, and ensure that California can afford to pay for electricity.

An increase also may be necessary to entice private investors to buy the billions in bonds the state plans to sell to finance power purchases. And If a rate hike persuades Californians to use less electricity, it also could lessen the likelihood of repeated blackouts this summer.

Several lawmakers, including Assembly Speaker Bob Hertzberg, D-Sherman Oaks, have said a rate increase is inevitable. But consumer advocates have bristle at the prospect of any such hike.

Mike Florio, senior attorney with the Utility Reform Network, said instead of raising rates, Davis should follow through on his threats to seize the electricity generated by privately owned power plants.

Three months ago, the PUC — acting under strong pressure from PG&E and Edison — imposed an emergency 90-day surcharge on electricity bills that amounted to rate hikes of roughly 9 percent, or $5 per month, for renters and homeowners, and about 15 percent for businesses. The hike fell short of the 30 percent Edison and PG&E wanted.

Edison announced yesterday that it may resume paying hundreds of small power producers by the end of the week. The utility owes them more than $800 million and stopped paying them in January, prompting many to shut down. In all, such small producers supply more than a quarter of the power the state consumes.

Edison said it would begin mailing checks this week to those producers — known as qualifying facility generators, if the PUC approves a plan tomorrow to cut the price that utilities must pay them.

”While SCE continues to operate under conditions of financial distress, we want to do what we can to enable QFs to continue providing electric power for our customers in light of strained electricity supplies statewide,” said SCE Chairman Stephen E. Frank.

”We will be able to make payments only up to an aggregate amount that is available to us from rates actually received for QF payments.”

Frank also said that, because of flaws in a formula adopted by the PUC, these small power generators have received payments that ”far exceed” their costs.

”We have a responsibility to reduce these costs to the extent possible for our customers,” Frank said. ”So we are leaving it up to the discretion of the CPUC as to how the payment structure will be revamped and how we should allocate the payments to QFs.”