PUC tags consumers with huge rate boost

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Burden shifts from business to heavy residential users

The San Francisco Chronicle

The largest electricity rate increase in California history was adopted yesterday by state regulators after a one-day delay in which the burden on residential consumers was raised by more than $100 million.

The Public Utilities Commission split along party lines, the three Democratic appointees backing the increase and the two Republicans voting against.

“We cannot put our heads in the sand,” said Democratic commissioner Jeff Brown amid jeers from protesters in the PUC‘s San Francisco meeting hall. “We cannot pretend that this is a problem we can walk away from.”

The PUC had been scheduled to vote on the increase Monday but postponed a decision because of concerns that businesses would pay a disproportionately large share of the nearly $6 billion to be raised from higher bills.

The revised measure adopted yesterday shifted about $106 million from businesses and placed it squarely on the shoulders of residential consumers.

In the case of Pacific Gas and Electric Co., residential customers will see electricity rates soar by almost 55 percent, to 22.1 cents per kilowatt hour from 14.3 cents.

But electricity rates are different from bills. Because about half of all residential ratepayers are exempt from higher charges, overall monthly bills will increase by lower amounts.

Consumers who can stay within 130 percent of predetermined usage limits will experience no increase at all.

Other residential customers, including most families and multiperson households, will see their average monthly electricity bills rise by between 6 percent and 37 percent, depending on the amount of power used.

The effect of higher electricity rates is mitigated somewhat because other charges on PG&E residential bills will not change.

“These are the largest rate increases that I know of,” said Paul Clanon, head of the PUC‘s energy division and chief architect of California’s new rate structure.

The higher rates will take effect as of customers’ June 1 power bills but will not be fully reflected in monthly charges until July 1.

Consumer advocates adopted a fatalistic attitude to the rate increase, which regulators fast-tracked over recent weeks as state coffers have been rapidly depleted from daily power purchases.

The state Department of Water Resources has spent more than $6 billion since January buying electricity on behalf of California’s cash-strapped utilities.

“The state is going broke,” said Mike Florio, senior attorney for The Utility Reform Network in San Francisco. “We have to get the money from somewhere. Bankrupting the state is not an alternative.”

However, he said, it would have been preferable for consumers if the PUC had adopted an alternative rate structure that would have cost residential customers about $400 million less.

That alternative was never given serious consideration by the commissioners, who focused instead on a rival proposal submitted by PUC President Loretta Lynch.

Although the commissioners were acting on a rate increase of historic proportions, the meeting hall took on a surreal air yesterday because three of the five members chose to be elsewhere for the occasion. They spoke and voted via speakerphone.

Lynch, who was at the Millbrae City Hall, called the rate increase “unfortunate” but said higher bills will address the state’s financial troubles and promote conservation.

She wrote in her proposal that “every consumer in California is justified in feeling outrage at the rates we approve today and the bills they will have to pay tomorrow.”

But Republican Commissioner Richard Bilas, speaking from the Mendocino Art Center, said the PUC was moving too quickly in enacting rate increases that had not been fully analyzed.

Warning that the rate increase will lead to “a recessionary death spiral,” he said, “Many businesses will flee the state or shut down entirely.”

Bilas’ Republican colleague, Henry Duque, speaking from a Texas hotel, said the rate plan was “incoherent” and “misguided” and will do nothing to promote construction of much-needed new power plants.


The only two commissioners present for yesterday’s vote were Brown and his Democratic colleague Carl Wood. They were forced to bear the brunt of taunts from protesters in the audience.

One protester, Susan Rodriguez of Oakland, was escorted from the hall by California Highway Patrol officers after loudly attempting to place Brown and Wood under citizen’s arrest.

“Do the right thing,” other protesters shouted. But Brown countered that “mature people must bite the bullet” and accept the necessity of higher rates.

Industrial power users, including many Silicon Valley stalwarts, had lobbied aggressively for lower rates, arguing that they were being asked to bear an unfairly heavy burden from the proposed rate structure.

Under yesterday’s revised measure, industrial electricity rates and average monthly bills will increase by 49 percent, compared with more than 50 percent under the original proposal.


The California Alliance for Energy and Economic Stability, a coalition of some of the largest business groups in the state, said in a statement that the final rate structure “is little more than a fig leaf for what remains a terribly disproportionate rate increase allocation.”

The alliance’s members include the California Chamber of Commerce, the California Business Round Table and the California Retailers Association.

Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer Rights in Santa Monica, said residential ratepayers and small businesses are being hit hardest by the rate increases.

“The special interests that foisted deregulation upon us get off easy.” he said. “This unforgivable betrayal by the governor will not be forgotten.”

Gov. Gray Davis had no immediate response yesterday to the PUC‘s action.


Electricity rates were increased 37 percent for PG&E‘s small commercial customers, 41 percent for large commercial customers and just over 19 percent for agricultural customers.

Southern California Edison residential customers saw their power rates jump 47 percent, to 22.4 cents per kilowatt hour from 15.2 cents. Average monthly bills will rise by between 6 percent and 37 percent.

“We are now in a position to pay the electricity bills in California,” the PUC‘s Brown said. “But it will not be easy.”

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