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Edison, Consumer Advocates Disagree on Rate Plan

Electricity: At hearing today, the utilities are expected to push for an end to the freeze, while aiming for a 10% increase.

October 27, 2000|NANCY RIVERA BROOKS | TIMES STAFF WRITER

Southern California Edison executives said Thursday that their proposal to boost electricity rates would increase a typical residential bill by about $5.50 a month. But they said the plan would shield customers from wild market prices, while ensuring that the Rosemead utility is not financially harmed by California's electricity crisis.

But consumer advocates viewed the matter differently, blasting the SCE proposal filed late Wednesday with the California Public Utilities Commission, and a similar proposal by PG&E Corp.'s Pacific Gas & Electric, as an attempt to stick customers with the full cost of a deregulation scheme gone awry.

Doug Heller, consumer advocate for the Foundation for Taxpayer and Consumer Rights in Santa Monica, said the utilities "will dig as deeply into our pockets as they can until somebody comes along and polices them properly."

The PUC had requested proposals from SCE and PG&E in advance of a hearing today on whether the utilities should be allowed, after the end of the current rate freeze, to bill ratepayers for uncollected electricity costs that piled up during the rate freeze.

SCE, a unit of Edison International, proposed a five-year rate stabilization plan that would include "a modest energy rate increase" beginning in January of no more than 10%. SCE and PG&E of San Francisco said more detailed proposals would be filed in November.

Both utilities also asked the PUC to end the current rate freeze, contending that they have amassed enough credits to pay off their "stranded assets"--nuclear plants and other properties that were deemed uneconomical under deregulation.

Assembly Bill 1890, the landmark 1996 law that restructured the state's electricity industry, gave the state's three big investor-owned utilities the opportunity to recover 100% of their stranded assets by March 31, 2002. The law also froze electricity rates for residential and small-business customers until that date or until the utilities had paid off their stranded costs, whichever came first.

A rate increase, the companies argue, would eliminate the need to send a big bill to customers for high wholesale electricity costs, which since at least June have exceeded the amount the utilities could collect from their customers. For SCE, those electricity "undercollections" totaled $2.4 billion at the end of September, and for PG&E the total was $2.9 billion.

The rate stabilization plan would protect utility customers from the free-market rates paid this summer by the customers of San Diego Gas & Electric. The Sempra Energy subsidiary paid off its stranded assets more than a year ago, and when electricity prices soared this summer, customer bills doubled and tripled. In August, their electricity rates were capped by state legislators retroactively to June 1, putting some customers in the happy position of getting a bill this month with a zero balance, Sempra Chief Executive Stephen L. Baum said Thursday during a telephone conference with analysts about the company's sharply higher earnings.

Stephen E. Frank, SCE's chief executive, told reporters Thursday that the utility is asking the PUC "to take some immediate action to ensure rate stability, ensure reliability and financial solvency."

Edison and PG&E executives have said that their utilities face insolvency if they cannot recover these electricity costs and that investment in equipment that transmits electricity would suffer.

Under the SCE plan, rates could rise to nearly the 1996 level, which was considered so high at the time that a massive overhaul of the state's electricity market was warranted. SCE estimates that a 10% increase would raise rates by 1 cent per kilowatt-hour, adding about $5.50 to the typical monthly residential bill.

It is unclear whether customers would continue to pay a fee on each monthly bill to pay off the 10-year bonds sold in 1997 to give ratepayers their current 10% discount.

Nettie Hoge, executive director of the Utility Reform Network, said the utilities "are trying to take all the risk and foist it off on customers."

"This is my mantra: We didn't ask for deregulation and we shouldn't have to pay for it," she said.

The typical August residential bill in 1996 was $107.66, and this August the same typical bill was $96.90, SCE said. If the full cost of electricity had been passed along to customers that month, the typical bill would have been $157.20, the utility said.

SCE and PG&E also proposed several market reforms and asked for greater freedom to avoid the voluble spot electricity market by signing long-term electricity contracts.

Also Thursday, Sempra Energy reported a 30% increase in third-quarter operating earnings, thanks to growing profit from energy trading and electricity generation.

The San Diego-based company reported third-quarter earnings, before an extraordinary charge, of $140 million, or 70 cents a share, up from $108 million, or 45 cents a share, in last year's third quarter. Net income for the 2000 third quarter was $110 million, or 55 cents a share.

The SDG&E parent became the first of California's utility holding companies to acknowledge that it probably will not be able to collect all of the costs it is amassing in buying electricity for its customers. Sempra took an after-tax charge of $30 million, or 15 cents a share, for such costs.

"SDG&E followed the blueprint for deregulation . . . , but the current political environment effectively may require SDG&E to share in the cost of deregulation incurred by its customers," Baum said.

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