The Associated Press
The California Public Utilities Commission recommended emergency rate increases to two cash-starved utilities Wednesday, but only for 90 days and for far less than the utilities had requested.
The PUC granted Pacific Gas and Electric Co. and Southern California Edison Co. surcharges that will result in rate increases of about 9 percent for residential customers – about $5 a month on an average bill.
The hikes will translate into increases of about 7 percent for small businesses, 12 percent for medium commercial customers and 15 percent for large commercial and industrial customers.
The utilities will not have immediate access to the money generated by the rate hikes. It will be put into an account controlled by the PUC and cannot be touched by the PG&E or SoCal Edison until an independent audit of those utilities has been completed.
If the audit determines the companies are not entitled to the money, it will be refunded to customers.
The stock price of both utilities dropped sharply after the recommendation was announced.
The stock of PG&E‘s parent company, after being up earlier in the day, was down $1.38 to $18.19 – a fall of more than 7 percent – within minutes after the announcement. SoCal Edison was down $1.94 to $13.06, a drop of nearly 13 percent.
The recommendation was released by the PUC on the fifth day of public hearings into the rate hike requests. A day of public hearings was to follow, with the PUC set for a formal vote on the proposal on Thursday.
Consumer advocates were quick to criticize the recommendation. Mindy Spatt of The Utility Reform Network called the utility companies “rich kids asking for welfare.”
“We can’t permit these electric generators to continue to gouge us,” Spatt said. “It’s less than they are asking for, but more than they deserve.”
Soaring power costs have plunged PG&E and SoCal Edision more than $9 billion in debt as they struggle to buy enough electricity to serve 25 million Californians.
A state-enforced price cap has kept the two investor-owned utilities from passing their debt on to customers. Both say the rate freeze threatens them with imminent bankruptcy.
In addition to the immediate rate hikes, both utilities warn far steeper hikes are inevitable – up to 76 percent by 2003 for SoCal Edison customers.
On Tuesday, the Federal Energy Regulatory Commission said in Washington that utilities should let that commission guide their future actions.
The FERC asked a federal court in Washington to throw out a lawsuit filed by SoCal Edison asking the agency to cap regional wholesale power prices.
FERC said SoCal Edison must give the commission’s plan time to work, particularly its order that the utilities buy 95 percent of their power ahead of time.
But consumer advocates say the utilities should bear the brunt of ballooning natural gas prices.
They say the state’s deregulation system is broken, and FERC should use its authority to prevent power generators from charging such high rates.
At last week’s PUC hearings, consumer advocates suggested ways for the utilities to pony-up the cash they need to buy power – by selling stock, liquidating assets or getting loans from the utilities’ parent corporations, which have combined assets of $71.8 billion.
“This is day one of the ratepayer revolt in California. The single greatest public policy mistake in California history – deregulation – has become one of its greatest scandals,” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights.
“Gov. Gray Davis has capitulated to the states’ utility companies and ordered a massive multi-billion dollar ratepayer bailout cloaked in a series of increases under 10% that will ultimately cost consumers billions of dollars.”
Wholesalers argue low supplies of natural gas have forced them to raise their prices.
The utilities admit a rate increase will only put a dent in the debt. They hope, however, that it will give a strong signal to investors and banks that the utilities’ financial future is rosier.
They must maintain a good credit rating to borrow money to buy power and avoid the rolling blackouts that could cripple the state’s booming economy.
PG&E filed papers with the federal Securities and Exchange Commission Tuesday stating that without a rate increase or additional financing, it only has enough cash to buy power through early February. SoCal Edison filed similar papers last month.
Bruce Foster, vice president of SoCal Edison, said customers should help the utility stay out of bankruptcy court.
“I think the customer has to pay the wholesale market price,” he told reporters. “We do think, under the law, that we have an entitlement to regain the cost we’re paying into the power exchange.”
PG&E said last week a third of the 60 companies it buys power from no longer will sell to the utility unless it has cash in hand.