San Diego Union Tribune

Regulators appointed by Gov. Gray Davis are expected to vote today on a proposal to raise electricity rates more than 40 percent, a move supported by business groups and Democratic legislative leaders but opposed by consumer groups.

San Diego Gas and Electric Co. is not included in the proposal, which is intended to help the state continue to buy expensive power, encourage conservation, and aid two nearly bankrupt utilities, Pacific Gas and Electric and Southern California Edison.

A member of the state Public Utilities Commission, Carl Wood, said SDG&E‘s request for higher rates came in later than those from PG&E and Edison and will be considered separately.

”We are going to be looking at that pretty quickly,” said Wood, a former resident of Fallbrook who has been assigned to take the lead on the SDG&E request.

SDG&E is in a special situation because its rates were capped by legislation in September, rolling back bills that doubled and tripled during the summer after SDG&E became the first utility to be deregulated.

Having survived last summer’s rapidly escalating prices, many SDG&E customers are in no mood to hear about rate hikes.

”Electricity costs are out of control and they are just ripping us,” said George Sperry, a La Mesa police officer. Sperry said that years ago he took the advice of SDG&E and converted his home to all-electric.

The rate increase proposed yesterday by PUC President Loretta Lynch for PG&E and Edison is 3 cents per kilowatt-hour.

The state began buying power for customers of all three utilities in mid-January after PG&E and Edison could no longer borrow money. Rates that utilities could charge customers were frozen under a failed deregulation plan as wholesale power costs soared, producing what the utilities say is a $13 billion debt.

The state has been buying power on the expensive spot market, spending about $1.5 billion a month. Momentum for a rate increase began to build last week with the arrival of rolling blackouts. Part of the reason was the offline status of many small generators, who have not been paid.

The abrupt proposal by a Davis appointee for a large rate increase was not publicly endorsed by the governor. A spokesman said Davis continues to ”hope and expect” that the existing rate structure will be adequate.

But importantly, Steve Maviglio, Davis’ press secretary, also said that Davis will not lobby against the increase.

”The governor has not had conversations with any commissioners about a potential rate hike,” Maviglio said.

The increase would be in addition to two increases for PG&E and Edison customers already in the rate structure a 9 percent increase ordered by the PUC in January and the expiration next March of a 10 percent ”rate reduction” under deregulation being paid for by a $6 billion bond issue.

The author of several major energy bills in a legislative special session said that to ”maintain the fiction” that a rate increase is not needed now would only result in a larger increase later.

”The governor needs to not get in the way of the PUC raising rates,” said Assemblyman Fred Keeley, D-Boulder Creek.

Senate President Pro Tempore John Burton, D-San Francisco, said there is no alternative to a rate increase unless the nearly bankrupt utilities ”rob a bank or win the lottery.”

Edison issued a statement suggesting that the proposed rate hike may not be high enough to meet all utility costs. Lynch said her proposed rate increase is large enough to avoid more rate increases.

A spokeswoman for Philip Angelides, state treasurer, said it was impossible for him to assess the impact of Lynch’s proposal because he doesn’t know what California is paying for electricity.

”We have not received information from the Department of Water Resources about what their revenues needs will be,” said Colleen Beamish, the treasurer’s spokeswoman.

The Davis administration has imposed strict secrecy surrounding purchases made by the Department of Water Resources.

The proposed rate hike, meanwhile, infuriated consumer advocates.

”This is no solution to anything but the utilities’ whining,” said Nettie Hoge, executive director of The Utility Reform Network in San Francisco, which opposes further rate hikes.

Hoge said the state’s primary problem is a dysfunctional power market. She urged the state to impose a windfall profits tax on power companies, seize their power plants, or both.

Harvey Rosenfield, president of the Foundation for Taxpayer & Consumer Rights, similarly urged the state to present power companies with an ultimatum: return overcharges and reduce rates within seven days or face the seizure of their plants.

Investors took a different view.

Stocks of all three investor-owned utilities surged. Shares of the parent companies of PG&E and Edison rose 30 percent, and Sempra Energy parent of SDG&E saw its shares rise 9 percent.

Bond analysts also were encouraged by the likelihood of a rate hike.

”It’s a positive step,” said Zane Mann, publisher of the California Municipal Bond Advisor, a newsletter.

”Positive because they are talking about realistic prices for consumers. I haven’t crunched the numbers but it sounds like a sizable sum of money.”

Lynch said her proposal would not increase the monthly bills of more than 45 percent of residential customers. Legislation in January exempted customers who use less than 130 percent of the ”baseline,” a minimum amount for residences that varies among climate zones.

The PUC president also wants to encourage conservation by giving the biggest rate increases to customers that use the most energy.

”Electricity hogs will need to pay more for the energy they use, especially this summer,” Lynch said.

The proposed rate increase is supported by two large business groups, the California Manufacturers and Technology Association and the California Chamber of Commerce.

Jack Stewart, CMTA president, said his group told Davis last week that a rate increase of 40 percent to 50 percent was needed. He said experts believe a rate hike of that size will encourage the 10 percent conservation in power use needed this summer.

”You need to get the financial side of it stabilized, so that everyone can be healthy going into what is going to be a very difficult summer,” Stewart said.

Alan Zaremberg, the chamber president, said a rate increase is needed to match retail rates paid by utility customers with the high cost of wholesale power.

”We think that without such a match there is a greater chance of the lights going out this summer,” Zaremberg said. ”Reliability is a key issue to the California economy.”

Nonetheless, some consumers wonder how California could have worked itself into such a mess.

”They told me it was the power of the future,” police Officer Sperry said of his all-electric home. ”I didn’t know it was the future of their profits. Sometimes I think we arrest the wrong thieves.”