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The Associated Press 

California approved emergency rate hikes Thursday for two cash-starved utilities, who denounced the move as inadequate and pleaded for intervention from the governor and state Legislature to avoid bankruptcy. 

Wall Street reacted negatively to the decision by the Public Utilities Commission: Standard and Poor’s and Fitch Inc. sharply downgraded the credit-worthiness of Pacific Gas and Electric Co. and Southern California Edison Co. 

The stock of both utilities dropped sharply for the second consecutive day. 

Wall Street’s fiscal analysts said the rate increase was insufficient to assure the teetering utilities with enough cash flow to remain solvent over time. 

S&P reduced the investor-owned utilities’ rating to near junk bond status. Fitch went even further, cutting their rating to the level of junk bonds. 

The intervention sought by utilities could include a state-backed, multibillion-dollar bond package to refinance the utilities’ debts, with ratepayers paying off the bonds through a monthly surcharge on their bills. 

PG&E spokesman Ron Low said company executives have presented the bond financing plan to Gov. Gray Davis. SoCal Edison also is interested in exploring the proposal, a company executive said. 

Davis has not yet responded to the proposal, spokesman Steve Maviglio said. 

“Four years ago, Californians were promised that deregulation would reduce the cost of electricity. If I had my way, there would be no rate increase to consumers,” he said. 

The governor is expected to discuss electricity issues Monday. 

in his State of the State Address, including a new plea to federal officials to intervene in California’s electricity crisis and a $1 billion energy conservation and supply plan. 

The plan is expected to include low-cost financing for new power plants, plus incentives for consumers to replace energy-guzzling appliances. 

The five-member PUC voted unanimously to allow PG&E and SoCal Edison to raise residential rates 9 percent, and businesses’ bills by 7 percent to 15 percent, effective immediately. 

Utility company executives had urged the PUC to approve rate increases of 26 percent to 30 percent or more, and Wall Street analysts had supprted rate hikes of that magnitude. 

“We are voting the epitaph for deregulation in California today,” Commissioner Carl Wood said. “Deregulation is dead.” 

The commission also said it would convene Jan. 18 in San Francisco to consider deregulation-related issues. The commission did not offer specifics of the Jan. 18 meeting, but consumer groups suggested more rate increases may be in the offing. 

The stock of both utilities continued their two-day slide. 

PG&E’s parent company, whose stock lost 13 percent of its value on Wednesday, was down another 29 percent to $12 on Thursday. SoCal Edison, which lost 18 percent on Wednesday, was down another 12 percent Thursday to $10.75. 

Together, the utilities have lost more than $9 billion since June, paying spiraling prices for wholesale electricity but blocked by a rate freeze from passing those costs on to their 10 million customers. 

They buy power for roughly 30 cents a kilowatt hour and, because of a rate freeze, they can only charge customers about a fifth of that amount. 

Low said lawmakers in Sacramento should move quickly to stave off insolvency for the utilities, which say they could run out of cash within weeks. 

SoCal Edison agreed. 

“The Legislature will have to take action on a very expedited basis,” SoCal Edison spokesman Gil Alexander said. 

The rate freeze, part of California’s 1996 deregulation law, was established at what was then a generous level to assure utilities a steady stream of revenue as they sold off assets and made the transition to deregulated companies. 

But earlier this year, the cost of wholesale electricity skyrocketed. The rate freeze prevented the utilities from charging customers more to cover those costs. The utilities must maintain a good credit rating to borrow money to buy power. Otherwise, they might be forced to institute rolling blackouts. 

Standard and Poor’s was skeptical of the rate hike’s value, saying it would make only a small dent in the utilities’ cash-flow problem. 

Even if the rate increase remained in effect for a full year, not just 90 days, it would provide only $274 million for PG&E and some $234 million for SoCal Edison, the credit-ratings service said. The numbers were calculated on 1999 figures from the Energy Department. 

“It may be a question of too little, too late,” said David Bodek of Standard and Poor’s. 

But the PUC’s estimates were far higher. 

The commission’s advisory group estimated the rate increase would provide $1.4 billion annually, said Kim Malcolm, chief of staff to PUC President Loretta Lynch. 

——— 

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 

California Public Utilities Commission: http://cpuc.ca.gov 

California approved emergency rate hikes Thursday for two cash-starved utilities, who denounced the move as inadequate and pleaded for intervention from the governor and state Legislature to avoid bankruptcy. 

Wall Street reacted negatively to the decision by the Public Utilities Commission: Standard and Poor’s and Fitch Inc. sharply downgraded the credit-worthiness of Pacific Gas and Electric Co. and Southern California Edison Co. 

The stock of both utilities dropped sharply for the second consecutive day. 

Wall Street’s fiscal analysts said the rate increase was insufficient to assure the teetering utilities with enough cash flow to remain solvent over time. 

S&P reduced the investor-owned utilities’ rating to near junk bond status. Fitch went even further, cutting their rating to the level of junk bonds. 

The intervention sought by utilities could include a state-backed, multibillion-dollar bond package to refinance the utilities’ debts, with ratepayers paying off the bonds through a monthly surcharge on their bills. 

PG&E spokesman Ron Low said company executives have presented the bond financing plan to Gov. Gray Davis. SoCal Edison also is interested in exploring the proposal, a company executive said. 

Davis has not yet responded to the proposal, spokesman Steve Maviglio said. 

“Four years ago, Californians were promised that deregulation would reduce the cost of electricity. If I had my way, there would be no rate increase to consumers,” he said. 

The governor is expected to discuss electricity issues Monday. 

in his State of the State Address, including a new plea to federal officials to intervene in California’s electricity crisis and a $1 billion energy conservation and supply plan. 

The plan is expected to include low-cost financing for new power plants, plus incentives for consumers to replace energy-guzzling appliances. 

The five-member PUC voted unanimously to allow PG&E and SoCal Edison to raise residential rates 9 percent, and businesses’ bills by 7 percent to 15 percent, effective immediately. 

Utility company executives had urged the PUC to approve rate increases of 26 percent to 30 percent or more, and Wall Street analysts had supprted rate hikes of that magnitude. 

“We are voting the epitaph for deregulation in California today,” Commissioner Carl Wood said. “Deregulation is dead.” 

The commission also said it would convene Jan. 18 in San Francisco to consider deregulation-related issues. The commission did not offer specifics of the Jan. 18 meeting, but consumer groups suggested more rate increases may be in the offing. 

The stock of both utilities continued their two-day slide. 

PG&E’s parent company, whose stock lost 13 percent of its value on Wednesday, was down another 29 percent to $12 on Thursday. SoCal Edison, which lost 18 percent on Wednesday, was down another 12 percent Thursday to $10.75. 

Together, the utilities have lost more than $9 billion since June, paying spiraling prices for wholesale electricity but blocked by a rate freeze from passing those costs on to their 10 million customers. 

They buy power for roughly 30 cents a kilowatt hour and, because of a rate freeze, they can only charge customers about a fifth of that amount. 

Low said lawmakers in Sacramento should move quickly to stave off insolvency for the utilities, which say they could run out of cash within weeks. 

SoCal Edison agreed. 

“The Legislature will have to take action on a very expedited basis,” SoCal Edison spokesman Gil Alexander said. 

The rate freeze, part of California’s 1996 deregulation law, was established at what was then a generous level to assure utilities a steady stream of revenue as they sold off assets and made the transition to deregulated companies. 

But earlier this year, the cost of wholesale electricity skyrocketed. The rate freeze prevented the utilities from charging customers more to cover those costs. The utilities must maintain a good credit rating to borrow money to buy power. Otherwise, they might be forced to institute rolling blackouts. 

Standard and Poor’s was skeptical of the rate hike’s value, saying it would make only a small dent in the utilities’ cash-flow problem. 

Even if the rate increase remained in effect for a full year, not just 90 days, it would provide only $274 million for PG&E and some $234 million for SoCal Edison, the credit-ratings service said. The numbers were calculated on 1999 figures from the Energy Department. 

“It may be a question of too little, too late,” said David Bodek of Standard and Poor’s. 

But the PUC’s estimates were far higher. 

The commission’s advisory group estimated the rate increase would provide $1.4 billion annually, said Kim Malcolm, chief of staff to PUC President Loretta Lynch. 

——— 

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 

California Public Utilities Commission: http://cpuc.ca.gov