Utilities seek immediate rate hike to avoid insolvency

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The Associated Press

Two huge utilities are seeking permission to make consumers pay as much as 30 percent more for their electricity, saying the deregulated energy market has left them $9 billion in the red.

Pacific Gas and Electric Co. and Southern California Edison Co. Wednesday urged California’s Public Utilities Commission to lift a rate freeze that has stabilized electricity bills for 10 million homes and businesses for the last three years.

The investor-owned utilities also want approval for rate hikes – 26 percent for PG&E and 30 percent for SoCal Edison. That would raise average $55 electric bills to $68 and $71.50 per month.

Deregulation was supposed to lower energy prices for consumers by increasing competition. Instead, California utilities have found themselves captive to energy wholesalers, whose profits have soared.

Gov. Gray Davis, who went to the White House Wednesday to discuss the crisis with President Clinton, said it could be a while before consumers get rate relief.

“I think it’s going to be a good two years before we can have enough additional supply to balance out demand. When we have that, deregulation may work,” Gov. Gray Davis said after conferring with President Clinton on the crisis.

At an emergency public hearing in San Francisco, the utilities said they need the hike to stave off bankruptcy and assure Wall Street of their long-term credit worthiness.

But at least one consumer advocate questioned the utilities’ motives. “This is just part of a demand for more rate increases. They are using it as an excuse,” said Doug Heller, spokesman for Santa Monica-based Foundation for Taxpayer and Consumer Rights.

The companies also said their losses have climbed to more than $9 billion this year as they buy energy at sharply higher wholesale prices, but are barred by the rate freeze from passing the costs on to customers.

The freeze limits electricity rates to 6.5 cents per kilowatt hour. They now pay wholesalers between five and six times that amount in a market that has been strapped for supplies, with numerous power plants down for maintenance and imports tight, partly due to a cold snap and reduced hydroelectric power in the Pacific Northwest.

“We are out of credit and we are close to being out of cash. People will not lend us money to buy power. You need to understand that,” PG&E General Counsel Roger Peters told the commissioners.

The five-member PUC ruled unanimously last week that electricity rates should be increased. Just how much is uncertain – the PUC said it would decide the issue on Jan. 4.

Meanwhile, SoCal Edison asked a federal appeals court in Washington to force the Federal Energy Regulatory Commission to intervene to stabilize and lower wholesale prices, by requiring sellers to set prices according to cost, not market demand.

A response from FERC is expected by Tuesday.

Earlier this month, federal regulators ordered an overhaul of California’s electricity market in a push to control skyrocketing prices and curtail supply shortages that have pushed the nation’s most populous state to the brink of blackouts.

Also Wednesday, U.S. Energy Secretary Bill Richardson extended for another week his order requiring electricity producers to send power to California to ease shortages.

Since wholesale electricity prices began to soar this summer, PG&E and SoCal Edison have sought to lift the rate freeze they agreed to as part their transition to a fully deregulated market.

San Diego Gas and Electric Co., which serves 1.2 million customers in San Diego and southern Orange Counties, had its rate freeze lifted last year after it sold off assets and completed the transition.

When SDG&E began passing its costs to customers, electric bills doubled and tripled. That prompted state and federal investigations, and warnings that a similar fate awaits the rest of California.

Consumer Watchdog
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