PUC plan would make some consumers pay big

The Associated Press
Thursday May 10, 2001


SAN FRANCISCO — Customers of California’s two largest utilities who use the most electricity will pay much more to run canneries, tumble laundry or water crops under a tiered rate plan implementing record hikes approved in March. 

The rate plan proposed Wednesday by Loretta Lynch, president of the state Public Utilities Commission, suggests how the record rate hikes should be allocated among residential, industrial, commercial and agricultural customers. 

Residential customers of Pacific Gas and Electric Co. and Southern California Edison Co. who use the most electricity would face average rate hikes of 35-40 percent, said Paul Clanon, director of the PUC’s energy division. The increases do not affect customers of San Diego Gas and Electric Co. 

And industrial users, such as factories and food processors, could face hikes of 50 percent or more as the state desperately tries to start recouping the $5.2 billion it already has paid to buy power for customers of those financially ailing utilities. 

But, under Lynch’s plan, as many as half of the 9 million customers of PG&E and SoCal Edison would not see their bills rise at all. 

“I thought it should be spread so each kind of customer class shares the burden, rather than by usage, which weighs against large (commercial, agricultural and industrial) users,” Lynch said. 

“The simple reality for at least 50 percent of residential consumers is that their bills are going up,” countered Mindy Spatt, spokeswoman for The Utility Reform Network, after the news conference. 

Lynch also called for a study on creating a real-time pricing pilot program for large customers and federal agencies. Proponents of real-time pricing say that charging customers the full price of electricity during hours of high demand will prompt them to shift their use to cheaper times of the day. 

“For those who want those kinds of theories to be tested, why not let them test them?” Lynch said. Though it would be great, Lynch said, if shifting demand brought down record wholesale power prices, “I don’t think it’s possible.” 

Spokesmen from both utilities said they had yet to see the official proposal and were not ready to comment. Many groups involved in the proceedings said the delay left less time to meet Thursday’s deadline for written remarks on the proposals. 

An attorney with the California Farm Bureau Federation said it’s unfair that residential customers are shielded from rate increases for a portion of their use, while farmers would be charged more for every kilowatt. 

“I think it’s clear people are going to be impacted tremendously by these rate increases,” said Ron Liebert.  

“Even if you only got 30 percent, that’s still on top of the 1 cent (increase) that went in effect in January.” 

Lynch’s plan is the culmination of weeks of discussion among customers, state officials, consumer activists and the utilities about how best to allocate the record rate hikes approved in late March by the PUC. 

Those rate hikes will affect all classes of customers, from small families to the huge Silicon Valley facilities powering the Internet, but not all will face the same magnitude of rate increases. 

And, even within those classes, customers will pay more depending on when they use the electricity. Those who use power during times of highest demand – generally, during daylight hours – will pay the most. 

Lynch said her plan “recognizes that energy is expensive at every hour of every day by every customer,” but penalizes those who do not cut back on energy use or try to shift to different times of the day. 

Under Lynch’s proposal, agricultural customers could face rate hikes ranging from 23-30 percent, with increases capped at 30 percent. Industrial users face average increases of 50 percent or more, and commercial users average 34-45 percent hikes. 

Her proposal, Lynch said, designs rates to encourage conservation and provides $5 billion over the next year to help pay the state Department of Water Resources for the billions it has spent providing electricity for customers of PG&E and Edison. 

Lynch left the door open for future rate hikes, noting that the state provides its electricity-buying expenses to the commission only on a monthly basis, while wholesale electricity prices continue to soar. 

Lynch’s proposal, and a largely similar proposal from PUC administrative law judge Christine Walwyn, will be reviewed in public hearings throughout the state the rest of this week, though that leaves little time between their input and the PUC vote. 

Parties to the distribution plan – including large industrial power users, consumer watchdog groups and the California Energy Commission – will have the chance to speak about the two proposals Friday in San Francisco. 

The PUC then will meet Monday to approve a rate design that will start appearing on customers’ bills as early as June 1. The PUC initially approved the rate increases March 27, and power used during the six-week interim period will be subject to the new rate design and charged to customers over the next 12 months. 

Since late March, the PUC has reviewed dozens of proposals for how it should allocate those record rate hikes. 

Lynch’s system divides California utility customers into five different tiers based on how much electricity they use. Under state law, customers face no rate increase for electricity they use that is up to 130 percent of their baseline amount. 

Baseline is an average amount of usage based on climate, geography and season. Utilities use this average, set by the PUC, to fairly bill customers so that customers are not penalized for living in the desert rather than in more temperate climes. 


Low-income customers within 175 percent of federal poverty levels also are exempt from rate hikes. 

Those are the first two tiers. Each of the three higher tiers for residential customers are based on how much power is used, with higher rates charged as usage increases. 


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