California regulators raise electricity rates

The California Public Utilities Commission Tuesday approved an electricity rate increase of 3�/kw-hr effective immediately and proposed a formula for the utilities to reimburse the state for purchases made on behalf of retail customers. Regulators also ordered the utilities to begin paying for power delivered to them by so-called qualifying facilities, small generators such as solar and wind plants.


By the OGJ Online Staff

HOUSTON, Mar. 27�The California Public Utilities Commission Tuesday approved an electricity rate increase of 3�/kw-hr effective immediately and proposed a formula for the utilities to reimburse the state for purchases made on behalf of retail customers.

Regulators also ordered the utilities to begin paying for power delivered to them by so-called qualifying facilities, small generators such as solar and wind plants. PUC Pres. Loretta Lynch said she proposed the increases to get "electricity hogs'' to conserve electricity and to keep Southern California Edison Co. and Pacific Gas & Electric Co. out of bankruptcy court.

Ignoring demands by protesters to seize generating plants, the PUC voted 5-0 in favor of the increase. It takes effect immediately for the 25 million Californians served by Pacific Gas and Electric Co. and Southern California Edison Co. (SCE)

"The PUC has done all it can,'' Lynch said. "We have fought back hard in every venue possible against these unjust energy prices.''

The PUC estimated the increase will raise $2.5 billion/year for PG&E and $2.3 billion/year for SCE. PG&E said under its frozen rates, the company has been collecting $400 million/month for the purchase of electric power and is spending $1.4 billion/month, a number that may go even higher in the coming months.

Andre Meade, a utilities analyst with Commerzbank in New York, said the increase will cause consumer pain, but up to now Californians have been "shielded from a dramatic rate increase in gas" affecting consumers in most other parts of the country.

It's in the interests of the state to make sure it gets paid and paying the QFs is the next most urgent consideration because they can't tolerate big receivables, Mead said. But he said the big independent generators will not forbear what the utilities owe them forever.

"I assume the next big tranche of payments will go to the big generators," he said. Otherwise, companies such as Mirant Corp. Duke Energy Corp., and Reliant Energy Inc. have the ability to pull the utilities into involuntary bankruptcy, Meade said.

SCE and PG&E say they have lost more than $13 billion since last summer because they cannot pass on to customers the full cost of wholesale electricity under California's 1996 deregulation law which froze retail rates. At its Tuesday meeting, the PUC also determined the rate freeze had not been lifted.

The increase takes immediate effect, but Lynch said regulators must still work out the details of a "tiered rate design'' aimed at rewarding customers who conserve energy.

As required by state law, Lynch said, the PUC also is requiring the utilities "to disgorge" revenue they have collected on behalf of the state. The California Department of Water Resources has purchased power but utilities have collected the payments. Under a proposed formula, SCE would reimburse the state at a rate of 7.2�/kw-hr; PG&E, at 6.5�/kw-hr; and San Diego Gas & Electric Co., at an average 9.5�/kw-hr. Lynch conceded what the PUC is proposing to collect from the utilities does represent the total amount presently owed the state.

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