PUC agrees to adjust electric rates if necessary

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The Associated Press

The California Public Utilities Commission might relinquish its control over electricity rates to the state Department of Water Resources under a proposed plan that could take effect next month if California’s recent power costs exceed its incoming revenues.

Both PUC members and public advocacy groups are worried about the proposal, which was released earlier this week.

“This gives an unelected, unaccountable state agency … the unilateral right to order rate increases for the next 15 years,” Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights said earlier this week. “Every mistake they could possibly make will also be passed along to ratepayers.”

Loretta Lynch, PUC president, and Oscar Hidalgo, a DWR spokesman, both said they believe current electric rates cover the state’s power buying costs for now. A sharp decrease in wholesale electricity prices this summer has dramatically lowered the state’s power expenses, making the need for additional retail rate increases less likely.

The latest snapshot of the state’s electricity revenues and expenses were scheduled to be released by the DWR Friday, but the agency delayed the disclosure until Sunday. The financial statement is expected to influence the final decision on whether the PUC should cede its ratemaking authority to the DWR.

The prospect of the DWR potentially hitting residents and businesses in the pocketbook without any oversight so troubles Sen. John Burton, D-San Francisco, that he is pushing legislation that would retain the PUC‘s authority over the process.

Since January, the DWR has spent more than $8 billion buying electricity for the customers of three financially ailing utilities. It will likely spend $43 billion to supply Californians with electricity over the next 20 years.

The PUC raised rates twice already this year, money which the utilities pass along to the DWR to help it pay its debts. But in order for the state to issue some $13 billion in bonds later this summer, it must show Wall Street that it has a solid stream of money rolling in that will cover its power-buying needs. Ratepayers will pay off those bonds over 15 years, and state officials say a solid revenue stream could help keep interest low.

The PUC/DWR proposal gives the DWR – a state agency whose director is not elected, critics point out – the ability to ask for rate increases that essentially would be rubber-stamped by the PUC with a 30-day to 90-day turnaround.

“This authority to pass through costs without CPUC review would never be permitted for costs incurred by a utility,” Burton wrote.

Burton’s bill would set aside a certain amount of ratepayer revenue to go to DWR, rather than steering the entire amount in its direction.

Power-buying expenses and administrative costs would be reviewed by the PUC and the public to determine if it is appropriate to raise electric rates to fund them.

The bill also would retain the right of Californians to have someone other than their local utility provide their electricity, a tenant of deregulation that the PUC has seemed likely to end.

In May, the PUC issued a record rate increase that raises electric rates by roughly 38 percent for residential ratepayers who use the most power, and by varying amounts for farmers and businesses. That followed a roughly 10 percent rate hike in January.

The state has bought electricity for the customers of Pacific Gas and Electric Co., Southern California Edison Co. and San Diego Gas and Electric Co. since January, when the utilities warned the state that high power prices and the inability to recoup their costs through frozen electric rates were driving them into debt.

PG&E filed for federal bankruptcy protection April 6. Edison and SDG&E both have agreed to sell their transmission lines at above-market value to the state to make up for their losses, though the Legislature has not decided whether to approve the deals.

The PUC will accept comments on the agreement until Aug. 1.

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