Court hearing could result in electricity rate hike

The Associated Press
Saturday February 10, 2001

While legislators continue to debate plans to help the state’s debt-ridden utilities avoid bankruptcy, a federal court judge could take the matter into his own hands Monday and order an increase of nearly 50 percent in electricity rates. 

Southern California Edison says the increase is needed so it can recover the billions of dollars it owes power generators. Edison wants the increase to begin within seven days of the judge’s ruling, before a hearing can be held on the underlying merits of its case. 

The utility is arguing that if the court later rules against Edison or lowers the amount granted, refunds could be made. 

Edison sued the state Public Utilities Commission last November for refusing to lift a rate freeze that has been in effect since the state deregulated its utilities in 1996. The company wants to pass to ratepayers wholesale electricity costs, which have skyrocketed since last summer. 

The lawsuit is scheduled to be heard in U.S. District Court on Monday, and if a ruling in Edison’s favor is issued the state is expected to appeal. 

A similar lawsuit filed by Pacific Gas and Electric Co. was recently transferred to the same court. Both cases are likely to be consolidated, although that hasn’t happened yet. 

Edison won a preliminary victory in its lawsuit in January when U.S. District Court Judge Ronald S.W. Lew agreed with the utility’s central claim that regulating wholesale rates was a federal – not a state – concern. But he allowed the PUC to pursue a claim that Edison ignored opportunities to buy electricity at a lower cost. 

The PUC is opposing Edison’s application in part because it has not finished its review of the company’s power purchases. 

Edison had originally sought a rate increase to help it recover past costs as well as cover any current cost overruns. After the state committed $10 billion to buy power on behalf of the utilities last week, Edison dropped the demand for current compensation. It is now seeking a smaller rate increase it says is needed to recoup about $2.5 billion in past costs. 

The PUC argues that if the injunction is granted and Edison recoups its costs within one year, rates would rise by about 3 cents per kilowatt hour – a nearly 50 percent hike. Ratepayers now pay a state-capped 6.5 cents for the cost of power, which doesn’t include additional costs for transmission and service. 

Edison says it wants to spread those costs over three years, raising rates by a more modest 1 cent per kilowatt hour. 

State Attorney General Bill Lockyer said late Thursday he will ask the court to deny Edison’s request or at least delay a ruling while the state debates several plans to reduce the debt incurred by Edison and Pacific Gas and Electric. 

The legislature is considering several options, including buying the state’s transmission grid from the utilities. 

“The situation which the governor and Legislature face is already complex, and granting SCE the relief it now seeks will simply create a new obstacle around which the state must navigate,” Lockyer’s court filing states. 

Lockyer also told the court that thanks to recent state action Edison no longer faces the threat of imminent bankruptcy and should not be granted any immediate rate hike. 

Lockyer and the PUC also both argue that Edison should not be allowed to alter an agreement it entered freely in 1996. 

“Edison zealously advocated and lobbied for the enactment of AB 1890 (the deregulation bill), knowing full well that AB 1890 froze rates and created risks for utilities,” the PUC states in its court filing. 

The PUC also argues that Edison “reaped billions of dollars in excess revenues as a result of the regulatory scheme it now attacks.” 

A recent independent audit commissioned by the PUC revealed that since 1996, Edison transferred $4.8 billion to its parent corporation, Edison International, which used the money to pay debt, buy back stock and issue dividends to shareholders. 



• California power regulators brace for an electricity-sucking cold snap stretching well into next week that could make it even tougher for the state to draw much-needed power from the Pacific Northwest. 

• The strapped power grid remains under a Stage 3 alert with reserves threatening to fall below 1.5 percent. No blackouts are expected. 

• Duke Energy files a lawsuit in federal court in Los Angeles challenging Gov. Gray Davis’ authority to commandeer long-term power contracts owned by financially struggling Southern California Edison and Pacific Gas and Electric Co. 

• A group of power suppliers sues in federal court in Los Angeles resisting the California Power Exchange’s attempt to make them pay nearly $1 billion in bills owed by Edison and PG&E. 

• Three power wholesalers, Reliant Energy, Dynegy and Mirant, form a committee to consider their options for obtaining payment for energy purchased by the Independent System Operator, which oversees the state’s power grid, and by Edison and PG&E. 

• Davis says that by the end of next week he expects to have agreement among state officials, SoCal Edison and PG&E on a plan to help the two utilities pay off their debts. 

• The state stands by its refusal to pay for the last-minute emergency electricity purchases the state power grid makes on behalf of Edison and PG&E. Southern California Edison CEO John Bryson tells lawmakers at an Assembly oversight hearing that his company can’t afford the high bills. 

• Also at the Assembly energy hearing, Bryson defends his company’s decision to issue dividends in September while the utility was facing extremely high wholesale costs.  

Failing to pay them would have scared off lenders, he testifies. 

— Robert D. Glynn, head of PG&E Corp., the parent of Pacific Gas and Electric Co., tells the Assembly panel that the parent company has not hidden its assets. PG&E Corp. restructured to let non-utility subsidiaries get separate credit ratings, but those entities are still fully owned by the parent company, Glynn says. 

— Law enforcement officials give the Davis administration their plan for enforcing an energy conservation mandate issued last week by Davis. It will take effect by mid-March. 

The executive order mandates $1,000 fines for retailers who fail to “substantially reduce” outdoor lighting after business hours. The goal is to reduce retail outdoor lighting demand by 50 percent. 

Stanislaus County Sheriff Les Weidman, president of the California State Sheriffs Association, says law enforcement wants to work with businesses, with an emphasis on rewarding those that dim their lights. 

— The California Energy Commission announces a new Web site, www.consumerenergycenter.org, aimed at helping consumers conserve power. 

— Assemblyman Dennis Cardoza, D-Atwater, introduces legislation that would double penalties for crimes committed during blackouts and give law enforcement advance notice so they can flood blackout areas with patrol cars. 



— A federal hearing is scheduled Monday in Los Angeles to consider an Edison lawsuit seeking to pass its high wholesale costs onto customers. PG&E has filed a similar lawsuit. State lawmakers, concerned that the utility may prevail in the case, hope to devise a debt-relief plan before the hearing. 

— The state’s Technology, Trade and Commerce Agency start an outreach campaign next week, sending e-mails to 80,000 associations, chambers of commerce, and economic development organizations that will in turn pass the message on to more than 300,000 businesses. 

— U.S. District Judge Frank Damrell Jr. holds a hearing Friday in Sacramento on the ISO’s attempt to continue requiring three major wholesalers to sell it power. He is weighing whether to replace his temporary restraining order against the three utilities into a preliminary injunction, the next step before a permanent injunction. 

— The governor expects to reach agreement by Friday on a plan to help Edison and PG&E pay off their debts. 



— High wholesale power costs, high demand, transmission glitches and a tight supply worsened by scarce hydroelectric power in the Northwest and maintenance at aging California power plants are factors in the crisis. 

Much of the problem is blamed on the state’s 1996 utility deregulation law, which required the state’s investor-owned utilities to sell their power plants and buy wholesale power, but capped the rates they can charge customers. At the same time, no new power plants were built in California. 

Edison and PG&E say they’ve lost nearly $13 billion due to soaring wholesale prices and are on the brink of bankruptcy. Electricity and natural gas suppliers, worried by the two utilities’ poor credit ratings, are refusing to sell to them, leading the state to start buying power for the utilities’ nearly 9 million residential and business customers.