PUC Votes To Jack Up Power Rates

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Tiered increases approved as protests disrupt meeting

The San Francisco Chronicle

The bill finally came due for California’s experiment with electricity deregulation as consumers were hit yesterday with the largest rate increase in state history, an average 40 percent jump in monthly power costs.

The immediate rate hike was unanimously approved by the Public Utilities Commission during a rowdy meeting that was repeatedly interrupted by chanting and jeers from protesters.

Highway Patrol officers were directed by PUC President Loretta Lynch to remove several demonstrators from the packed San Francisco auditorium.

“These are extraordinary moments in California’s history, and extraordinary moments demand extraordinary courage,” PUC member Geoffrey Brown said before the rate increase was passed.

The commissioners approved a new 30 percent increase and made permanent a “temporary” 10 percent increase adopted in January. This will allow the state’s two largest utilities to charge customers an extra $4.8 billion a year.

PUC members said higher rates will help overcome the wide disparity between skyrocketing costs charged by power companies for electricity and the relatively low amount paid by consumers under California’s 1996 deregulation law.

However, consumers’ bills will not go up until a “tiered” rate system can be introduced, requiring those who use more power to pay higher fees. That system is expected to be in place by May.

Gov. Gray Davis, who has tried to distance himself from the PUC‘s move since it was unveiled Monday, said in a statement yesterday that the rate increase was “premature” and that he did not support the decision.

“While I have opposed rate increases, if it becomes clear that a rate increase is absolutely necessary for the good of the state, I will support one that is fair and do my duty to convince Californians of its necessity,” he said.

Several PUC members acknowledged that such a huge rate increase might not have been necessary had the commission acted sooner to remedy California’s power woes.

“We should have done this in January,” Brown said, “but we didn’t have enough information.”

“This rate increase is long overdue,” said Richard Bilas, who also sits on the commission. “We are finally transfusing some blood.”


If so, the donor — ratepayers — did not go willingly to the operating theater. A number of citizens rose to speak at yesterday’s meeting, and not one was in favor of higher power rates.

“This is being shoved down the people’s throats,” said Dorothy Diez, an elderly San Francisco resident. “Why don’t they put the bills where they belong and not on my back?”

She and others called on state officials to take a harder line with out-of-state power generators, which have reaped windfall profits by charging sky-high wholesale prices for their electricity.

Consumer groups urged the PUC to support special taxes on the generators’ earnings or even seizure of the companies’ California power plants.

“Your actions are reprehensible,” Ross Mirkarimi, a public-power supporter, told the commission. “Do not do Gov. Davis’ dirty work.”

The governor did not attend yesterday’s meeting, but his presence nonetheless loomed large over the proceedings.

Consumer advocates derided Davis’ claims this week that he played no role in the decision to raise rates. They noted that the governor’s appointees hold a majority on the PUC and worked closely with Davis on a variety of past issues.

Davis’ staff was briefed on the rate hike before the PUC publicized its decision.


“Gov. Davis controls the PUC,” said Doug Heller, assistant organizing director of the Foundation for Taxpayer and Consumer Rights. “He is responsible for the rate hike. We are paying more because of the failure of his leadership.”

“It seems absurd that Gov. Davis is saying his own agency is acting without his consent,” said Susannah Churchill, head of energy policy for the California Public Interest Research Group. “He’s just looking for political cover.”

The PUC decision was made on a day when California’s grid operators declared a Stage 2 alert, the first in a week, indicating that power reserves had dropped below 5 percent.

When tiered rates are implemented, customers of Pacific Gas and Electric Co. will see rates go up between 9 percent for “medium” power users and 36 percent for “heavy” users.

Those who can keep power consumption to within 130 percent of pre-established limits will see no increase beyond the 10 percent rate hike adopted in January.

Customers of Southern California Edison will see rates increase between 8 and 27 percent.

Bruce Foster, an Edison vice president, called the rate increase “a step in the right direction,” but said further increases may be needed to defray soaring power costs this summer.

PG&E spokesman Ron Low said the San Francisco utility needs to study the PUC‘s decision more closely before determining whether a 40 percent rate hike will be sufficient.

“The PUC has done all it can,” said Lynch, the PUC president. “We have fought back hard in every venue possible against unjust energy prices.”


In the end, though, she said state regulators were forced to admit that no help would be forthcoming from federal authorities in capping wholesale power rates, and that generators would continue exploiting California’s chronic electricity shortage.

“We maintain a responsibility to keep the lights on,” Lynch said.

Along the same lines, the PUC approved a requirement that PG&E and Edison repay the state Department of Water Resources for about $4 billion in power purchases made on the cash-strapped utilities’ behalf.

The commission also passed a motion forcing PG&E and Edison to pay smaller power generators for their output. Half of all such generators were shut down during last week’s blackouts because they had not been paid by the utilities.

However, the PUC is only requiring that utilities pay for future electricity purchases, and did not address the millions of dollars in payments still owed the power companies.

Ann MacLeod, executive director of the California Cogeneration Council, an association of smaller generators, said that by avoiding the question of back debt, the PUC‘s move will do nothing to restore plants to operation.

“These generators will not come back online as a result of this decision,” she said. “In fact, a greater number likely will have to drop offline.”

Protesters chanting, “Hell no, we won’t pay,” urged consumers after the PUC meeting to not include the higher fees in upcoming bills.

“This is just the beginning,” said Medea Benjamin, who was among the demonstrators evicted from the earlier proceedings. “Rates will go up and up and up.”

Consumer Watchdog
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