California PUC rate increase to raise $50 million

By Kate Thomas

HOUSTON, May 9 -- California's electric rate increase will raise about $50 million/year from utility customers, regulators said Wednesday.

The California Public Utilities Commission proposed two plans, including a special pilot project directed at federal government users, to allocate increases in retail rates using a tiered pricing system. The parallel plans were submitted by PUC Pres. Loretta Lynch and an administrative law judge to implement a Mar. 27 decision to raise rates 3¢/kw-hr.

The March decision did not specify how the rate increase would affect different classes of customers. The plans are expected to be voted on Monday by the PUC to be effective June 1. In general, the rate increases are designed to encourage conservation by subjecting the biggest users to the highest rates.

Lynch said her proposal was based on the proposition "we all have to share the pain." Higher bills should prompt consumers to change their behavior and the state should "get the reliability benefits as soon as possible," she said, on the third day in a row of rolling statewide blackouts.

Under the plan she submitted, almost half of Southern California Edison Co. and Pacific Gas & Electric Co.'s residential customers will not experience a rate increase, Lynch said during a press conference. Rates for the rest will rise 41-58% in excess of a percentage of their existing base usage. Very heavy user might experience a 300% increase, she said.

Under Lynch's proposal agricultural users' bills would rise 23-50%. Commercial and industrial customers' bills would climb 20-50%.

She proposed spreading the anticipated $1 billion in undercollections from low income customers across nonexempt residential users, commercial, and industrial customers, while the administrative law judge proposed industrial and commercial customers pick up the shortfall.

Lynch also proposed a pilot program under which she said federal users will be able to "experiment" with real-time pricing and feel the full impact of swings in wholesale electric prices. The federal government believes if price signal are high enough consumption and prices will drop, Lynch said. "I believe we should give them a chance to let it work."

The program will be designed to allow the federal government to experience what it "has advocated," she said, noting spot prices have climbed dramatically this week. It will allow them to test "these those theories. I say let them do it," she said.

Lynch denied the proposed program is a "dig" at the Federal Energy Regulatory Commission which resisted California lawmakers and regulators efforts to impose a cap on wholesale power prices and repeatedly criticized the state for capping retail rates.

Pacific Gas & Electric filed for bankruptcy protection because retail rates were not high to recover the full cost of its wholesale power purchases. California Gov. Gray Davis has proposed a bailout package for Southern California Edison that has so far kept the utility out of bankruptcy court.

Lynch said the increase combined with a proposed $12 billion bond package will be enough to pay the Department of Water Resources which has been buying electricity on behalf of the two utilities.