California regulators hold hearings on electricity rate increases

The California Public Utility Commission held emergency public hearings Wednesday on rate increase requests by Pacific Gas & Electric Co. and Southern California Edison Co. PG&E and Southern California filed earlier in December for electricity rate hikes of 26% and 30% respectively. The utilities argue without the hikes they will be teetering on the edge of bankruptcy and will literally run out of cash within weeks.


The California Public Utility Commission held emergency public hearings Wednesday on rate increase requests by Pacific Gas & Electric Co. and Southern California Edison Co. The hearings continue today.

PG&E and Southern California filed earlier in December for electricity rate hikes of 26% and 30% respectively. The utilities argue without the hikes they will be teetering on the edge of bankruptcy and will literally run out of cash within weeks. The utilities have accumulated a massive debt of $8 billion through the end of October. By the end of December, this debt is expected to climb to $11 billion. The debt was incurred from buying wholesale power to resell to customers at dramatically increased prices while unable to collect those costs from consumers.

The credit ratings agencies have threatened to downgrade these companies� ratings to �junk� bond status if there is no serious action taken by the CPUC on rates. The CPUC is expected to rule on the rate requests in a meeting on Jan. 4, 2001.

The two utilities are operating under a rate freeze that is supposed to last until the end of March 2002 or until the companies pay off their stranded costs whichever comes first.

According to published reports, consumer groups testified opposing any rate increases before the deadline stated in the restructuring legislation of 1996. The utilities willingly signed on to deregulation knowing there was a risk. Now that it didn�t work out consumer advocates questioned why consumers should bear the costs without utilities giving up something, too.

The Office of Ratepayer Advocates submitted testimony that opposed any rate hike on similar grounds as other consumer groups. But it did say it would accept a 10% hike if the commission deemed it absolutely necessary.

To verify if the rate hike is necessary, the CPUC selected two independent auditors to examine the books of the utilities and confirm if indeed the utilities were experiencing such a severe liquidity crisis that without rate relief the companies would be plunged into bankruptcy.

Standard & Poor�s stated last week that rate relief must be �substantially� more than a 10% increase to get the confidence back from the capital markets and prevent the agency from cutting deeply into their ratings.

The utilities say that any hike less than 80% means they are still losing money because of the high costs of power. They say that they can keep the lights on with the requested increases but would still be spending more than they take in.

Short of the 30% rate increase requested, Southern California Edison said it would not be able to borrow enough money to buy power and would have to ration power to its customers in some sort of system of rolling blackouts.

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