Power rates stay sky-high, even as wholesale prices fall

The Associated Press
Monday July 01, 2002

LOS ANGELES – Blackouts have ended and wholesale power costs have plummeted, but California’s energy crisis continues to haunt consumers. 

Californians aren’t paying any less for electricity even though wholesale power costs one-tenth of what it did when the state Public Utilities Commission approved a 30 percent rate hike 15 months ago. 

At the time of the rate hike, the PUC said electricity customers could expect lower bills as power prices fell. But commissioners have since rejected calls for rate reductions, saying the extra cash is needed to keep California’s two biggest utilities afloat and help pay $7 billion in debts. 

Southern California Edison and Pacific Gas & Electric Co. are collecting hundreds of millions a month more than they are paying for electricity, regulators say. The PUC projects the two utilities will collect an extra $2.7 billion this year. 

Under the PUC’s tiered rate structure, owners of large homes and businesses are feeling the biggest bite. 

James Crettol says he is selling some of his 2,600 acres of farmland in Kern County, partly because of electricity costs. 

“The cost was astronomical,” Crettol, who has joined two dozen other PG&E customers in seeking relief through a complaint filed with the PUC, told the Los Angeles Times. “In 2000, our annual bill was around $350,000. The following year we ended up with a bill about $460,000.” 

Cargill Inc., a Bay Area salt refiner, says the high cost of power may force it to make some tough choices. 

“We’ve had a lot of discussions within the company about whether we can really afford to stay in California,” said Lori Johnson, a Cargill spokeswoman. 

Consumer groups are challenging the PUC, arguing that it has reneged on its stated intentions for the rate-hike money. 

“The higher rates have become a slush fund that the PUC wants to use,” said attorney Matt Freedman of the Utility Reform Network. 

At its meeting on March 27, 2001, the PUC unanimously voted to raise rates by 3 cents a kilowatt-hour and to make permanent an earlier hike of a penny per kilowatt-hour. 

If the rate hike raised more money than needed, the PUC said customers could get relief. “In the future, we can refund revenues that exceed costs,” the PUC decision said. 

Today, the commission wants to use the billions of dollars in extra revenues to resolve lawsuits by PG&E and Edison that stem from losses the utilities incurred before the rate increases. In settling a lawsuit by Edison, the PUC allowed the utility to use more than $3 billion in ratepayer money to pay its debts. 

Paul Clanon, chief of the PUC energy division, said he anticipates that the agency will approve a 3 percent rate cut this summer or later. And he predicted that PG&E customers would see additional relief in early 2003 and that Edison customers would see rollbacks later that year.