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Regulators have voted for rate increases that would affect millions of customers across the state starting next month in an effort to rescue two shaky electric companies tangled in a deepening power crisis. 

The unanimous action by the Public Utilities Commission means that hikes likely would take effect beginning Jan. 4, affecting 10 million customers of Pacific Gas and Electric Co. and Southern California Edison Co. 

The two investor-owned utilities have been squeezed by California’s deregulation law. PG&E and SoCal Edison say they have absorbed $8 billion in losses since May, because a rate freeze prevents them from passing on to their customers the soaring costs of wholesale power. 

The PUC’s decision means that rate freeze is likely to be lifted. 

“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. 

Barring dramatic action by the PUC, Standard & Poor’s this week threatened to relegate the credit ratings PG&E and SoCal Edison to “junk” status, a move that would make borrowing money difficult, if not impossible. S&P planned to update its views on the utilities’ finances Friday afternoon. 

The stocks of both utilities had both plunged by nearly $3 Thursday before the PUC reassured some kind of rate increase is likely. 

“It looks like the PUC isn’t going to let these companies go bankrupt so that’s a positive,” said utility analyst Mike Worms of Gerard Klauer Mattison & Co. 

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. 

Both PG&E and SoCal Edison said they were unhappy that the PUC did not act earlier. 

“The good part is, they’re doing something. The bad part is, they didn’t act in October,” Richard said. 

SoCal Edison, in a written statement attributed to its corporate communications department, said it “wished the commission had acted more decisively.” 

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. 

Consumer groups denounced the PUC action. 

“The big utilities are looking for a fantastic Christmas present,” said Dan Jacobson of California Public Interest Research Group. 

Chris Jones of the Association of Community Organizations for Reform Now or ACORN, which helps low-income residents, said workers just got an increase in the minimum wage, but are losing that with utility bills. 

“They got one dollar and have to give back four just to keep warm” he said. 

Utility bills doubled and in some cases tripled in San Diego this year after the rate freeze was lifted for California’s third-largest utility, San Diego Gas and Electric, when it completed deregulation. 

The 1996 deregulation law, and PUC regulations, required utilities to gradually sell off their generating assets. Once that is done, the rate freeze is lifted. The goal was to lower prices through competition. Instead, wholesale electricity prices rose and SDG&E passed the costs on to its customers. 

PG&E and SoCal Edison aren’t as far along in the transition to deregulation, and so remain subject to the rate freeze. 

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On The Net: 

Standard and Poors: http://www.standardandpoors.com/ratings 

Foundation for Taxpayer and Consumer Rights: http://www.ratepayerrevolt.org