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Utilities' Sales Cover Shortfall, Group Says

Energy: TURN says $4.5 billion PG&E and SCE got from other assets can offset power costs, which the firms dispute.


California utilities are making money, thanks to the state's much-maligned deregulation process, and they should be forced to use some of that cash to offset huge power purchasing costs racked up during California's summer electricity crisis, a San Francisco-based consumer group said Wednesday.

The group, called the Utility Reform Network, or TURN, said Southern California Edison and Pacific Gas & Electric have received more than $4.5 billion by selling electricity from their nuclear and other power assets and from the recovery of other so-called stranded costs.

By the group's reckoning, that cache more than covers the $4-billion shortfall the two utilities racked up this summer, when wholesale power prices set records but the companies were forced to absorb the costs because of a continuing freeze on the rates they can charge retail customers. The utilities and corporate parents Edison International and PG&E Corp. have said they will face serious financial problems unless the freeze is lifted and they are allowed to pass their costs to consumers.

"It's like claiming to be a pauper when you have one empty pocket and the other pocket is bulging," said TURN Executive Director Nettie Hoge. "We're saying look in both pockets."

TURN advocates changing state law, which prohibits the investor-owned utilities from using the "overcollections" in one area to offset the "undercollections" in the other.

The group estimates that ending the rate freeze would cause customer bills to double or triple--as they did this summer in San Diego, where the freeze was not in effect. In addition, according to TURN, consumers would be assessed a surcharge to pay for electricity already used last summer that would total $160 for each of Edison's residential customers and $190 for each of PG&E's.

The utilities attacked TURN's math, saying the group incorrectly tallied revenues associated with stranded assets--the name given to assets that were considered uneconomical under deregulation--and that revenues from power generation alone fall short of wholesale power cost debt.

What's more, the accounting change advocated by TURN does not address the fundamental problems with the state's electricity market, said Bob Foster, SCE vice president of public affairs.

"The first priority is to get the market functioning properly and under control," Foster said. "Our main concern is to keep what happened in San Diego from happening to our customers."

SCE, PG&E and TURN jointly asked the Federal Energy Regulatory Commission on Monday to impose a price cap of $100 a megawatt-hour on electricity sold into California. Currently, the California Independent System Operator has a $250-per-megawatt-hour cap for backup power, which serves to effectively cap prices in the primary market run by the California Power Exchange.

The utilities have asked the California Public Utilities Commission for permission to end the rate freeze and to pass high wholesale electricity costs on to customers. The PUC decided Tuesday to reconsider these questions, including the accounting change proposed by TURN, and Commission President Loretta Lynch said she thinks the basic assumptions underlying the restructuring of the state's electricity industry should be reconsidered.

"It's a very positive sign that they're going to look at the whole kit and caboodle," said David Bodek of Standard & Poor's, which with other rating agencies recently lowered the debt outlook to negative for the utilities or their parent companies.

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