SAN FRANCISCO — Representatives from Southern California Edison made it clear at Tuesday’s meeting of the state Public Utilities Commission that they expect customers, both residential and business, to carry the full weight of the utility’s huge debt.
This followed Pacific Gas and Electric Co.’s announcement earlier Tuesday that it expects to run out of cash by early February unless the PUC allows it to raise customers’ bills or it receives additional financing.
PG&E filed a Form 8-K on Tuesday morning with the federal Securities and Exchange Commission, said SEC spokesman John Heine. Publicly traded companies file the form between quarterly and annual reports if major changes to the business are expected. PG&E said it filed the form to update the PUC on testimony given at last week’s hearing.
Escalating power costs have forced PG&E and SoCal Edison to accumulate more than $9 billion in debt. SoCal Edison filed a Form 8-K with the SEC on Dec. 27.
A state-enforced price cap has kept the two investor-owned utilities from passing their debt on to consumers, which has hurt their credit rating – essential for borrowing money to buy power and avoid rolling blackouts that could cripple the state’s booming economy.
“I think the customer has to pay the wholesale market price,” said Bruce Foster, SoCal Edison’s vice president. “We do think, under the law, that we have an entitlement to regain the cost we’re paying into the power exchange.”
PG&E said last week that a third of the 60 companies it buys power from no longer will sell to the utility unless it has cash in hand.
And while consumer rate hikes would alleviate the problem somewhat, almost everyone agrees the most viable long-term solution is to force power wholesalers – via the Federal Energy Regulatory Commission – to lower the rates they charge utilities for power.
SoCal Edison has filed a suit trying to force FERC to do just that, an opinion PG&E supports and expects to echo in the coming weeks. FERC recently placed a “soft cap” on wholesale prices, which the utilities have criticized, saying it only requires extra paperwork for wholesalers before they charge higher prices.
Wholesalers counter that low supplies of natural gas have forced them to raise their prices.
On Tuesday, FERC asked a federal court in Washington to throw out SoCal Edison’s suit and give the commission’s plan time to work, particularly its order that the utilities buy 95 percent of their power ahead of time.
Gov. Gray Davis joined SoCal Edison’s suit Tuesday, filing a friend of the court brief.
“As the only guardian against the price gouging by wholesale power producers, the Federal Energy Regulatory Commission has failed in its responsibility to protect Californians from what the agency itself describes as a dysfunctional market for electricity,” Davis said in a prepared statement accompanying his announcement.
SoCal Edison officials attended the PUC’s fourth day of emergency public hearings to argue for rate increases. Without them, the utilities warned, they face imminent bankruptcy and won’t be able to provide electricity to power 10 million California homes and businesses – affecting around 25 million people.
PG&E has asked the PUC for a 26 percent rate hike, and SoCal Edison wants an immediate 30 percent increase. But both utilities say far steeper hikes are inevitable – as much as 76 percent over the next two years for SoCal Edison customers.
But that would make only a tiny dent in the utilities’ growing debt, and Wall Street may not be satisfied unless consumers pay for the entire $9 billion.
If not, PG&E’s credit rating will decline, putting it into default on bank loans and inevitably leading to bankruptcy, James Asseltine, a managing director at Lehman Bros. in New York said at Friday’s hearing.
The PUC has said some rate hikes are necessary, but Davis reportedly drew the line at 10 percent in earlier, private negotiations with the utilities.
Consumer groups, such as The Utility Reform Network, continue to argue that rate increases are a quick fix and only will hurt consumers.
“My opinion is that they’re all a bunch of crooks,” said Sylvia Siegel, 82, who founded TURN in the 1960s. “They’re bleeding us. I certainly don’t think they deserve what they’re asking for.”
State administrative law judges will advise the commissioners Wednesday whether to grant requests from PG&E and SoCal Edison to raise their electric rates.
The PUC can then accept, amend or ignore the recommendation when it makes its official decision Thursday.
At last week’s hearings, consumer advocates suggested myriad ways for the utilities to pony-up the cash they need to buy power – by selling stock, liquidating assets or getting loans from the utilities’ parent corporations, which have combined assets of $71.8 billion.
The state’s ratepayer advocate suggested the utilities buy back the power plants they sold during the deregulation process. That would help them avoid price gouging by current plant owners, many of which are out of state, said Jason Zeller from the state Office of Ratepayer Advocates, and arm of the PUC.
The utilities, which were required to sell the plants in the switch to a deregulated energy market, said they can’t afford to pay fair market value for them.
All sides were hoping for federal intervention. So far, FERC has declined to do anything that could be seen as derailing deregulation.
Davis faces growing criticism over the power crunch, and increasing speculation on what it might mean for his political future. He will call the Legislature into special session Wednesday to consider remedies.
The session will run concurrently with the regular session that also begins Wednesday. A bill passed with a simple majority in a special session takes effect in 90 days, instead of Jan. 1 as it would in a regular session.
Measures could include a Democratic proposal to use $2 billion of the state’s $10 billion budget surplus to help hold down electricity prices, possibly by building or buying power plants.
Davis hasn’t ruled out state-owned power plants. However, he will likely propose spending $1 billion for measures such as encouraging more peak power generation and consumer purchases of energy-efficient appliances, said spokesman Steve Maviglio.
On the Net
Securities and Exchange Commission: http://www.sec.gov
Pacific Gas and Electric Co.: http://www.pge.com
Southern California Edison: http://www.edisonathome.com