PUC ruling aids business, could hurt residents

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The Riverside Press-Enterprise

Inland companies that bought electricity on the open market
last year will be allowed to keep those contracts for cheaper
power under a plan approved Thursday by California power

Some lawmakers and consumer advocates criticized the decision,
saying it could mean residential users and small businesses may
be stuck with higher rates.

The Public Utilities Commission, voting 3-2 after months of
delay and debate, chose to let hundreds of customers who signed energy deals before Sept. 20, 2001, to retain those contracts.

Customers include California Steel in Fontana and Tamco Steel in
Rancho Cucamonga as well as the University of California,
McDonald’s and other factories and industrial plants that say they’ve saved thousands, even millions, of dollars on their energy bills as a result.

“We are going to keep our direct access contract with all the
savings we have been able to enjoy,” said C. Lourenco Goncalves,
chief executive of California Steel.

The company, which employs 988 workers to produce sheet metal, had blamed a $ 3.7 million loss last year on soaring electricity and gas costs. It bypassed Southern California Edison last July by expanding an existing power purchasing contract with Sempra Energy.

Two weeks ago, Goncalves said, the company extended the contract with Sempra an extra year, to December 2003. He said those new arrangements should allow the business to return to profitability.

“I think it’s in the best interest of the state,” said Dan
Douglass, counsel for the Western Power Trading Forum and the
Alliance for Retail Energy Markets. “It will permit customers to
continue to have the right to choose their energy supplier while
at the same time ensuring that there are no cost shifts that
unfairly burden those customers that opted not to choose.”

Consumer advocates and lawmakers counter that millions of
California residents and small businesses didn’t have the clout to
negotiate cheaper power deals, and could get stuck with an unfairly large portion of the state’s multibillion-dollar power-buying debt unless businesses are forced to pay their share.

The PUC “should not have done that until there was a guarantee
that the residential and small business users’ rates will not go
up as a result of this,” said Sen. John Burton, D-San Francisco.

While the Legislature’s February 2001 law left it up to the PUC
to decide when to stop customers from shopping around for
electricity, few thought the commission would wait so long and that so many customers would switch to competing energy sellers in the process, said Doug Heller of the Foundation for Taxpayer and Consumer Rights.

“They’re allowing the very same businesses that pushed for
deregulation to escape the problems that resulted from
deregulation,” Heller said.

The PUC had spent months debating the issue. A recent change on the commission gave supporters of direct access the extra vote
they needed Thursday to approve the plan, despite a written
request from Sen. Debra Bowen, D-Marina del Rey, Burton and
fellow Democratic Sen. Byron Sher to delay the vote.

In a nod to their letter, Commissioner Jeff Brown, who sponsored the measure, promised the PUC would consider charging direct access customers an “exit fee” to ensure they pay some portion of the debt. If the PUC can’t wrangle an exit fee, Brown said the decision allows it to reconsider a retroactive ban on those energy-buying arrangements.

“It wouldn’t surprise me one iota to see a business that’s been
handed the keys to the candy store with this decision challenge the PUC‘s legal authority to impose a subsidy repayment schedule in the future,” said Bowen, head of the Senate Energy Committee.

NOTES: Staff writer Leslie Berkman and The Associated Press contributed to this report.

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