San Diego Union Tribune
The California Public Utilities Commission laid out a framework yesterday for transferring much of its watchdog role in ensuring fair electricity rates to the state Department of Water Resources.
The controversial proposal is in response to legislation earlier this year that puts the water department in charge of state power purchases. Utilities commission action is needed to ensure that the water department has enough revenue to make the purchases and to clarify areas of responsibility, including oversight of power rates.
Under the draft agreement made public yesterday, the commission would guarantee that consumers pay enough to cover interest payments on a planned $13.4 billion bond sale later this year. The guarantee is considered an essential element for completing the bond sale.
The bonds’ proceeds are needed to repay some $8 billion the water department already has spent to purchase electricity and to cover future payments.
California began buying electricity through the water department earlier this year after the state’s utilities were unable to make purchases because of credit problems brought on by the state’s failed deregulation plan.
No mention was made in the draft agreement of the possibility of further rate increases to cover electricity purchases. Some observers have speculated that the current rate structure, even after two rounds of rate increases, may not cover all costs.
On the other hand, the draft agreement states that the water department itself will determine if the prices it pays for electricity meet the legal test of being just and reasonable, a determination heretofore made by the utilities commission.
Under the utilities commission’s procedure, the public is invited to comment on the draft. An administrative law judge for the commission will consider the draft before issuing a proposed decision. A full commission vote is expected Aug. 23, a deadline that would have to be met if the bond offering is to proceed as planned later this year.
Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights, said the utilities commission’s draft agreement would allow a “secretive agency of dubious competence controlled by the governor and completely unaccountable to the public” to unilaterally order rate increases.
“It was deregulation which got us into the mess we are in today,” Rosenfield said. “Now Wall Street is demanding that the (utilities commission) be forced to surrender its authority and legal responsibility.”
He urged the commission to reject the draft proposal.
Carl Wood, one of five members of the Public Utilities Commission, said the draft agreement was driven largely by legislation empowering the water department as an electricity purchaser. With a state department buying power, Wood said, oversight shifts to the governor and the Legislature.
Commissioner Richard Bilas said he saw the agreement as empowering the water department as “prosecutor, judge and jury” in matters of electricity purchasing.
“The argument is that it’s better off this way than the way we were,” Bilas said. “And that’s true in the short run. But what about in the long term?”