Calif. utility seeks 30 pct rate hike

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Tuesday December 26, 9:27 pm Eastern Time Calif. utility seeks 30 pct rate hike (UPDATE: Updates with reaction from business, consumer group in paragraph 3, 5-8)

LOS ANGELES, Dec 26 (Reuters) - Southern California Edison is seeking to hike customer rates for electricity by 30 percent, effective January 4, 2001, its parent company said in a Securities and Exchange Commission filing on Tuesday.

http://biz.yahoo.com/rf/001226/n26202876.html

The plan includes a trigger mechanism for further rate increases of five percent every six months under certain conditions although the utility also proposes limiting the rate hike to 10 percent for low income customers.

The proposed rate hike was higher than consumers and some small businesses were ready to accept, according to lobbyists for both groups, who called Edison's filing a negotiating gambit ahead of a crucial meeting of state regulators.

California regulators are due to hold hearings this week on possible rate hikes for Southern California Edison, a unit of Edison International (NYSE:EIX - news) and PG&E Corp (NYSE:PCG - news) unit Pacific Gas and Electric. A decision is expected on January 4, 2001.

The California Small Business Association will testify this week in favor of a ``reasonable rate increase'', but would have to study whether to support a hike as large as the one suggested by the utility, said Jim Conran, the group's vice president for government affairs.

``We are interested in seeing price predictability. That was the cornerstone of our discussion,'' said Conran, whose group represents about 180,000 small firms employing some two million state workers.

Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer Rights, said his group will continue to fight rate hikes now and will ready a ballot initiative for 2002 that mandates rebates if large increases are approved.

``They're trying to use Wall street as a tool to influence California policy,'' Heller said of Edison's SEC filing.

The utilities have run up billions of dollars in power purchase costs this year which they have been unable to pass on to customers due to a rate freeze with the consequent cash crisis taking them to the brink of bankruptcy.

A price freeze for residential customers was imposed for up to five years under the trailblazing 1996 legislation which deregulated California's power markets.

Southern California Edison estimates its shortfall stood at $3.2 billion at the end of November and is expected to reach $4.9 billion by year-end, according to the SEC filing.

Last week credit ratings agency Standard & Poor's said the two utilities risk of running out of cash ``within a matter of weeks'' and warned it could downgrade debt ratings to junk status unless urgent action was taken.

A chronic shortage of electricity has led to skyrocketing wholesale power prices in California this year. There have been accusations that the shortage has led to ``price gouging'' by power producers.

California Gov. Gray Davis has sought refunds from power generators and marketers who have reaped huge profits this year as prices rose to record levels.

Federal regulators have, however, refused to order refunds despite admitting prices were not ``just and reasonable'' as required by U.S. law.

Parent Edison International said on Friday it was taking several cash-conserving actions including eliminating its fourth-quarter dividend and cutting 2001 spending by an initial $100 milliion.

Wholesale power prices in California started to soar in late spring with supplies struggling to keep pace with surging demand linked to a buoyant economy.

California's power problems are also rooted in the absence of any significant new plants during the last decade, partly due to uncertainty connected with the deregulation of the state's electricity industry.

-- Martin Thompson (mthom1927@aol.com), December 27, 2000

Answers

Why would a power company who has fiduciary responsibility to its share holders go this heavily in debt just to provide power to the good citizens of California? I never worked for a company who had such a humanitarian side.

-- David Williams (DAVIDWILL@prodigy.net), December 27, 2000.

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