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THE CALIFORNIA ENERGY CRISIS

PUC Chief to Urge Rate Hike, Favors 'Tiered' System

March 26, 2001|DAN MORAIN and NANCY VOGEL and STUART SILVERSTEIN | TIMES STAFF WRITERS

SACRAMENTO — California's top energy regulator said Sunday she will propose raising electricity rates as early as Tuesday, with consumers seeing higher utility bills in May.

Confronting dire projections about the cost and supply of power as summer nears, Loretta Lynch, president of the California Public Utilities Commission, said the rate increases will be structured so that large energy users, including residential consumers, will pay the most. Such a structure, she hopes, will force conservation.

"We need to move forward, and the PUC has substantial evidence [to justify a rate hike] that it didn't have 90 days ago," said Lynch, who was appointed by Gov. Gray Davis to head the commission.

Given Davis' insistence that his appointees follow his lead on major policy shifts, Lynch is unlikely to take such a step without the Democratic governor's assent. Davis has said repeatedly that he opposes any rate hikes, but Davis spokesman Steve Maviglio declined to comment, and Lynch would not discuss any talks she had with Davis.

Three of the five members on the commission--including Lynch--are Davis appointees, and it appears likely that Lynch has enough votes for a rate increase.

The state Constitution empowers the commission to set rates paid by customers of Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. The three utilities supply power to 85% of the state's population.

Some sources have speculated that rates could rise by 20% to 50%, or even higher--beyond the roughly 19% in rate hikes already approved or authorized by law. But Lynch said she isn't sure how much rates will rise.

The magnitude of the increase depends on detailed information she has not yet received showing the cost of the state's power purchases and the supply of electricity.

Davis has said he fears that a rate hike would ignite a ratepayer rebellion that could lead to a statewide initiative next year--though he also has said he could solve the energy crisis in 20 minutes by raising rates.

Pressure is building on Davis to increase rates. A rate hike could ease what threatens to become a state financial crisis by ensuring that California can afford to pay for electricity.

An increase also may be necessary to entice private investors to buy the billions in bonds that the state plans to sell to finance power purchases. And if a rate hike persuades Californians to use less electricity, it also could lessen the likelihood of repeated blackouts this summer.

Davis aides also have concluded that rates must rise, given that wholesale power costs remain high, and several lawmakers, including Assembly Speaker Bob Hertzberg (D-Sherman Oaks), have said a rate increase is inevitable.

Consumer Advocates Have Other Ideas

Consumer advocates probably will oppose the hike. Mike Florio, senior attorney with the Utility Reform Network, said that instead of raising rates, Davis should follow through on his threats to seize the electricity generated by privately owned power plants.

"They have got to get tough with these generators, and if that means commandeering the output of these plants, that's what he's got to do," Florio said. "The only way to stop these guys is to cut them off at the pockets."

While Davis remains publicly optimistic that there won't be a rate increase--beyond the 19% already approved by past acts of the PUC and Legislature--his aides are convinced that rate hikes are necessary.

They cite three reasons: The state is spending billions to buy power, wholesale electricity costs remain high, and Californians must conserve more if the state is to avoid blackouts.

Lynch said the PUC can vote Tuesday to raise rates and set up the exact structure later. Lynch said she supports a "tiered" rate system that charges residents and businesses more if they're large users and if they fail to cut back over past usage.

"Tiered rates make sense to [encourage] conservation," Lynch said, "because we know we're going to have supply problems this summer."

Lynch also vowed that the PUC will move to quickly improve programs aimed at helping poor people buy energy-efficient refrigerators and other big-ticket appliances. But she also said the pricing structure will seek to ensure that everyone has a reason to cut back on use.

"We want to take into account what people can pay," Lynch said. "But you don't want people to have absolutely no incentive to conserve."

Davis has called it Californians' "patriotic duty" to reduce their power use by 10% from what they used last year, and is offering people rebates equal to 20% of their power bills if they cut power use by one-fifth between June and September.

Business analysts said a sudden boost in electricity prices would slow down growth, but shouldn't bring economic expansion to a halt.

By one estimate, a major electricity rate increase for business and consumers could shave California's employment growth by as much as 250,000 jobs over the next decade.

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