California Electric Utility Seeks to Recoup Costs from Customers : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

California Electric Utility Seeks to Recoup Costs from Customers Source: Knight Ridder/Tribune Business News Publication date: 2000-09-27

Sep. 27--Southern California Edison is asking state regulators for permission to charge customers for its soaring wholesale electricity costs -- a bill of nearly $2 billion and growing. Under the 1996 legislation that deregulated the state's electricity industry, rates are frozen for the residential and small business customers of Southern California Edison and Pacific Gas & Electric until March 31, 2002 or until the utilities pay off their "stranded assets," investments made in nuclear power plants and other obligations.

That has left the utilities to pay the difference between the frozen rate and this summer's skyrocketing market rates.

As of Aug. 31, the difference -- known as an undercollection -- amounts to $1.97 billion for Edison, the company said Tuesday.

Not all details have been worked out, but Edison will file a request later this week with the state Public Utilities Commission asking for permission to recoup their unpaid electricity costs after the rate freeze ends, said Jim Scalacci, its chief financial officer.

Edison officials couldn't say how much the extra cost would add to the typical Edison residential customer's bill. But if the current $1.97 billion in undercollections were sought all at once as a rate increase, it would raise rates more than 20 percent, Scilacci said.

"Of course we would not propose that," Scilacci said. "We would span it over a period of time."

Instead, the utility will make another filing to regulators later this year for a "rate stabilization plan" that would include a rate increase and a mechanism to recover its undercollections over a period of time, Scalacci said.

The utility said it also would consider other options -- including a lawsuit -- to recoup the costs.

Sempra Energy, parent of San Diego Gas & Electric, paid off its stranded assets more than a year ago, allowing it to pass through the full cost of electricity to its customers.

That resulted in SDG&E average monthly residential bills skyrocketing from $40 to $68 to $130 in less than three months this summer. After an outcry from SDG&E customers, area politicians and consumer groups, the state legislature in August capped SDG&E residential rates to a maximum of $68 a month.

The deregulated electricity market does not affect customers of municipal utilities, such as those in the cities of Riverside, Colton, Banning and Los Angeles.

Under the deregulation law, the investor-owned utilities are able to recover undercollections from future positive revenues until they recover all stranded costs or the March 31, 2002 deadline.

Edison believes it already has amassed enough credits through the pending sale of power plants and the valuation of its hydroelectric properties to offset its $1.3 billion in stranded assets.

But so far, the PUC has denied requests from the utilities to regain their uncovered costs after the rate freeze ends. Regulators also have prohibited the utilities from continuing to collect the charge to offset stranded costs.

Pacific Gas & Electric appealed the PUC's denial, but the Califoria Court of Appeal denied its petition for review. The case is being appealed to the state Supreme Court.

Edison believes the PUC -- in refusing to allow the utilities to recoup undercollections past the 2002 deadline -- is misinterpreting California's electricity restructuring law.

"That law placed California electric utility companies at risk for recovery of their stranded costs, but did not place them at risk for recovery of the costs of procuring electricity for customers," Edison said in a filing with the Securities and Exchange Commission.

PUC President Loretta Lynch said she recognized that the utilities are hurting. But Lynch said the ultimate answer isn't to expect consumers to foot the entire bill.

The action by the utilities also appears to presume that California's electricity woes will continue, leaving them no way to recoup their costs in the future, Lynch said.

"The presumption that the market will stay out of whack the next two years is incorrect," Lynch said. "I would hope the federal government will do something (about addressing the wholesale electricity market)," she said.

Lynch said regulators will take a look at the total utility picture -- including the revenue utilities continue to make from generating power. "We'll be asking for the revenue side as well as the expense side," she said.

PUC commissioner Carl Wood, a former Riverside resident, said Tuesday that he thinks it's unreasonable to assume that just because Edison is making the request that it will be approved.

Wood said this summer's higher electricity rates have been caused at least in part by a dysfunctional market and what he calls "unconscionable pricing."

"Edison ought to focus on getting money back from the generators and suppliers ...," Wood said.

Meanwhile, consumer advocates in San Diego and San Francisco requested that candidates for state or federal office sign a Ratepayer Protection Pledge to protect consumers from "unfair and unreasonable electric rates."

The pledge, developed by TURN (The Utility Reform Network), The Foundation for Taxpayer and Consumer Rights and Consumers Union, was mailed to all candidates Tuesday.

"Utility-style deregulation has obviously failed, and lawmakers must act now to prevent the entire state from being thrown into a financial crisis," said Nettie Hoge, executive director of San Francisco-based TURN.

The consumer groups said that if politicians sign the pledge, they commit to oppose any legislation or efforts to force ratepayers to pay Edison, PG&E or SDG&E retrospectively for this summer's high wholesale energy costs. They also would agree to "not allow for rate increases for PG&E or Edison ratepayers during the rate freeze period and beyond until such time as rates are just and reasonable."

TURN and FTCR said they will post a list of all candidates and their position on the pledge on their Web sites ( and (

-- Martin Thompson (, September 28, 2000

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