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Calif. Fails To Solve Energy Dispute

Thursday, December 28, 2000

By KAREN GAUDETTE Associated Press Writer SAN FRANCISCO (AP) - Gov. Gray Davis failed to broker a compromise Thursday between utility executives and consumer advocates over looming increases in electricity rates for 10 million Californians.

In a sometimes heated, closed-door meeting, the Democratic governor, on a speakerphone, urged consumer groups to agree to at least some of the rate increases utilities say they must have within days to avoid bankruptcy. Some consumer advocates said bankruptcy isn't such a bad idea. ``They created this mess and they need to solve it themselves,'' Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights said after the meeting. Separately, the state Public Utilities Commission held emergency hearings for a second day on the rate request and on the power crunch that has brought California perilously close to blackouts over the past few weeks.

``The overriding public interest is to keep the lights on,'' Southern California Edison attorney Henry Weissman told the PUC in asking for a rate increase. The financial crisis and the power crunch are blamed, in part, on the effects of California's deregulation of the power industry. Deregulation was supposed to lower prices for customers by increasing competition. But Pacific Gas and Electric Co. and SoCal Edison have lost more than $9 billion because of a combination of soaring wholesale electricity prices and a rate freeze, enacted as part of deregulation, that prevents the utilities from passing the cost on to their customers.

They want the PUC to approve sharp rate increase - 26 percent for PG&E and 30 percent for SoCal Edison - to stave off financial ruin and assure Wall Street of their creditworthiness. The proposed increases are more than double what Davis, negotiating privately with the utilities for the past two weeks, has said he is willing to accept. The proposed increases would raise average $55 electric bills to $68 and $71.50 per month. This spring, wholesale electricity prices zoomed upward, driven in part by rising natural gas prices, a shortage of generating capacity and canny power sellers who took advantage of the situation in California.

The rate freeze allows the utilities to charge no more than 6.5 cents per kilowatt hour. At one time, that was considered more than sufficient. In recent days, however, the price of power purchased during peak periods climbed briefly to $1.50 per kilowatt hour. The PUC hearings are designed to give the public a chance to voice their opinions before the commission votes on Jan. 4 on rate increases. Utility customers came out to protest, saying they cannot afford to bail the companies out. ``I really don't want to see the rates go up 26 percent,'' said Dorothy Diez of San Francisco, a retired receptionist. ``I have a very low income and I will be hurt.''

The two sides remained far apart Thursday during the closed-door meeting with the governor. But they did agree on one point - that the Federal Energy Regulatory Commission must cap wholesale energy prices before California has any hope of solving the crisis. ``The governor had a chance to hear both sides for the first time,'' said Michael Kahn, chairman of the state Electricity Oversight Board, which monitors California's electricity system. ``Everybody agreed that wholesale prices have to be brought under control and that the FERC should be responsible for helping to solve the problem.''

FERC has until Jan. 2 to respond to SoCal Edison's federal lawsuit seeking to force FERC to immediately curb wholesale prices.

http://news.lycos.com/headlines/TopNews/article.asp?docid=APV0312&date=20001228

-- Martin Thompson (mthom1927@aol.com), December 28, 2000