Southern California Edison Co., one of two huge investor-owned utilities shaken by California’s electricity crisis, announced cutbacks impacting 400 jobs Friday – a day after state regulators favored customer rate hikes in January to rescue the utilities.
SoCal Edison and its parent, Edison International, said they were cutting costs and that “more substantial reductions” were possible if its financial condition did not improve.
It was unclear whether the 400 contract-labor jobs would be eliminated or whether these workers would lose overtime opportunities as a result of the spending cuts.
“To preserve our ability to provide electric service and remain viable, we are taking these immediate cash-preserving actions,” Edison International’s chairman and president, John E. Bryson, said in a statement.
A consumer group denounced the company’s action, saying the jobs were “400 sacrificial lambs for the company’s political campaign to pressure the public.”
“They announce it on the weekend before Christmas. It is so transparently a fraud that it beggars the imagination,” said Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights. The Santa Monica-based group favors reregulating the industry.
SoCal Edison, the electric utility subsidiary of Edison International, serves some 4.2 million customers.
On Thursday, the Public Utilities Commission favored rate increases that would take effect next month that could affect millions of customers across the state.
The PUC said some form of increase was needed to rescue SoCal Edison and Pacific Gas and Electric Co., which like Edison has paid huge amounts for wholesale electricity but has been unable to pass those prices on to its customers because of a rate freeze. PG&E serves 4.7 million customers.
Edison International also said it will eliminate its fourth quarter stock dividend, which is usually paid at the end of January.
“Cost-reduction measures affecting electric system operations, maintenance and new investments will result in a reduction of an initial $100 million in SCE spending for 2001 and impact approximately 400 contract labor jobs,” the company said.
The statement was not clear on whether it would be cutting existing spending or planned new expenditures.
An Edison spokesperson did not immediately return calls.
The PUC‘s decision on Thursday means that the rate freeze is likely to be lifted on Jan. 4.
“This is crucial in light of the extraordinarily serious financial difficulties the dysfunctional wholesale markets have imposed on the utilities,” the PUC‘s order said. “We believe that retail rates in California must begin to rise.”
PUC President Loretta Lynch said the cost to the utilities of wholesale electricity has increased fivefold in the past three weeks.
“We are operating on an emergency basis,” Lynch added.
The PUC‘s action brought a sharp response from consumer groups, who said the decision paved the way for a bailout for the utilities to please investors.
“This is regulation by Wall Street. The commission has prejudged the case and decided, before any evidence has been presented, that the utilities will be granted a rate increase,” said Nettie Hoge, head of the utility watchdog group TURN.
But Dan Richard, a senior vice president with PG&E, said Wall Street’s approval was vital to PG&E‘s fiscal health.
Standard & Poor’s on Friday backed off its earlier threat to relegate the credit ratings of PG&E and SoCal Edison to “junk” status, a move that would make borrowing money difficult, if not impossible.
After both utilities’ stocks had plunged by nearly $3 on Thursday amid fears of an imminent financial calamity, they rebounded Friday.
PG&E‘s stock rose $1.81, or 10 percent, to close at $20.06 while Edison International’s surged by $1.31, or 9 percent, to close at $16.25.
Public hearings are planned next week on the PUC‘s order, and the commission is expected to formally approve the order at its Jan. 4 business meeting.
Lynch said the increase would likely go into effect immediately, and would show up in bills sent to consumers in February.
But the size of the increases were unclear. Richard said PG&E would set up a “rate-stabilization plan” that would spread out the spikes over time. The company earlier proposed a 17 percent hike, which would raise the average $54 monthly bill to about $63.
Meanwhile, with electricity imports slowing to a trickle, managers of the state’s power grid declared another Stage 2 alert Thursday, meaning that power reserves fell below 5 percent.
Consumers were asked to conserve and some commercial customers were warned that they may have to turn off some power. There have been nearly three dozen power alerts since June.