State PUC OKs plan allocating record rate hike

The Associated Press
Wednesday May 16, 2001

State power regulators finally decided Tuesday how to spread the pain of the biggest electric rate hikes in California history, boosting rates by as much as 80 percent for residential customers who use the most power. 

More than half of the residential ratepayers served by the state’s two largest utilities will see no increase at all in their rates if they don’t increase their use. 

But Pacific Gas and Electric Co. customers who consume the most will see their rates jump from 14.3 cents per kilowatt hour to 25.8 cents per kilowatt hour, which translates into an average increase of $85 per month for electricity. 

The plan, approved 3-2 by the state Public Utilities Commission, affects about 9 million customers of PG&E and Southern California Edison Co. 

Even after the vote, there was confusion within the PUC over the new rates. The commission released three sets of figures throughout the day, each with dramatically different rate hikes. Spokesmen for both PG&E and Edison said it will take at least a day of number crunching to know precisely how the rate hikes will affect the dozens of different customer classes. 

The new rates, which will appear on June bills, were approved nearly seven weeks after the PUC mandated a $5 billion rate hike. The split vote came after a week of intense lobbying by industrial, commercial, agricultural and residential groups – all hoping to shift more of the increases onto each other. 

“This is probably the worst economic calamity the state has ever seen,” said David Marshall, chief financial officer at Gregg Industries, a 400-person iron foundry in El Monte. “It has got ramifications well beyond anything that we can begin to understand.” 

Gregg already has switched its production cycle from during the day to a night shift to save electricity, Marshall said, but he expects the rate hike plan approved Tuesday to cost Gregg at least $1 million this year. 

Paul Clanon, director of the PUC’s energy division, said rate hikes on industrial customers would be capped at 49 percent. Rate hikes for agricultural customers are capped at 25 to 30 percent. Rate hikes for commercial ratepayers, such as banks, hospitals and restaurants, were not immediately clear due to conflicting numbers. 

Commissioner Richard Bilas said too high a percent of the hikes had been shifted onto commercial ratepayers. 

“While something has been done to tone down the impact on industrial customers, it appears to have been done at the expense of small and medium businesses, which make up the majority of businesses in this state,” Bilas said as he urged his fellow commissioners to vote against the proposal. 

The 80 percent figure for the biggest electricity users came from a chart released by Clanon after the vote. 

Under state law, a portion of every residential customer’s electric use – called baseline, a percentage of the average amount of electricity use in an area based on climate, geography and season – is shielded from rate hikes. 

The PUC could only raise rates on power use beyond 130 percent of baseline. Clanon’s chart shows an average 60 percent rate hike on all electricity use that exceeds 130 percent of baseline. 

The biggest losers are the biggest users. 

Residential power use is divided into five tiers, and electricity used within PG&E’s top tier will jump by 80 percent. About 9 percent of PG&E’s households fall in that top tier. 

Those hikes for the top tier translate into an average increase of $85 – from $232 to $317 – on monthly bills for such customers. 

For Edison’s heaviest residential users, the rate hike in the top tier is 71 percent – or an average increase from $194 to $265 on monthly bills. 

Even top-tier customers will not pay more for electricity use that falls within that first 130 percent of baseline. 

However, commercial, industrial and agricultural customers will have to pay their rate hikes on every kilowatt. 

Steve Strong, a plum and nectarine grower in Visalia, was optimistic the rate hikes won’t bruise his business. But with unstable weather, fluctuating costs and now the potential for blackouts that could hit refrigerated packing houses and shut down water pumps, agriculture is becoming an even riskier business. 

“I don’t have to go to Vegas or Tahoe, I’ve got enough gambling going on here,” he said. 

The rate hikes, which will begin appearing on June bills, will be retroactive to March 27 – the day the record rate hikes were approved – though those retroactive charges will be spread over a 12-month period. 

Commissioners were forced to shout their votes over the din of jeering protesters, who wore tombstone-shaped placards that read: “R.I.P. Affordable Energy.” 

PUC Commissioner Jeff Brown bellowed back at protesters: “We cannot walk away from it. We cannot pretend that this is some sort of problem that we can walk away from.” 

The final rates were a revised version of a proposal released by PUC President Loretta Lynch last week. Lynch postponed a scheduled Monday vote to rework her plan after a massive outcry from businesses proclaiming the proposed rate hikes would doom California’s economy, a critical statement from Gov. Gray Davis and pressure from fellow commissioners to lessen the impact on businesses. 

Since it unanimously approved the rate hikes in March, the PUC has crammed a year’s worth of work into six weeks, struggling to fashion rates that simultaneously recoup the $5.2 billion the state has spent buying power for the customers of the state’s two largest utilities and trigger enough conservation to help fend off some of this summer’s expected rolling blackouts. 

Customers of San Diego Gas and Electric Co. and those who buy electricity directly from energy wholesalers, such as the California university system, are shielded from rate hikes. 



• No power alerts Tuesday as electricity reserves stay above 7 percent. 

• A major credit agency downgrades California’s credit, citing the energy crisis’ increasing drain on the state’s finances. Moody’s Investors Services dropped the credit rating on the state’s general obligation bonds from Aa3 to Aa2. The credit change comes a day after Gov. Gray Davis’ release of a revised budget that trims $3.2 billion from his January proposal. 

• The North American Electric Reliability Council releases a report estimating that California could have 260 hours of rolling blackouts this summer. The report says the Northwest should have enough power to meet its needs this summer, but won’t have any excess to send to California. NERC also warns that transmission problems in other regions, such as New England and New York, could surface this summer. The report says Texas should be closely watched when it opens its market to full retail access. 

• State power regulators finally decided Tuesday, after a flurry of changing proposals, how to spread the pain of the biggest electric rate hikes in California history. Residential customers who use the most power could see their bills jump by 80 percent according to Paul Clanon, director of the PUC energy division. More than half of residential ratepayers served by the state’s two largest utilities will see no increase at all on their bills. Clanon said rate hikes for industrial customers are capped at 49 percent. Rate hikes for commercial users and farmers were not immediately clear due to conflicting numbers. 


On the Net: 

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

Gov. Gray Davis: http://www.governor.ca.gov