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PUC Approves Largest Electricity Rate Increase in State's History

Regulation: Some customers will pay up to 46% more. Commissioners, facing strong opposition before their unanimous vote, say they are trying to avert blackouts. Critics say move won't solve the crisis.


SAN FRANCISCO — With protesters jeering their disapproval, besieged utility regulators Tuesday adopted the largest electricity rate hike in the state's history and defended the action as the only way to keep the lights on for millions of customers.

The California Public Utilities Commission unanimously approved an increase of 3 cents per kilowatt-hour. That will boost rates by as much as 42% for some Southern California Edison customers and up to 46% for some served by Pacific Gas & Electric Co.

The rate increase, which will cost customers nearly $5 billion a year, takes effect immediately but will not show up on utility bills until at least May.

The rate hike is the most far-reaching and politically volatile action the state has taken thus far to ease an 11-month-old power crisis that has nearly bankrupted the two largest utilities and triggered blackouts. But critics say it does not solve the fundamental problem of runaway wholesale electricity prices.

For the Record
Los Angeles Times Thursday March 29, 2001 Home Edition Part A Part A Page 14 Metro Desk 1 inches; 35 words Type of Material: Correction
Rate increase--Step-by-step instructions for calculating electricity rate increases, which accompanied a story on the Public Utilities Commission in Wednesday's Times, were not accurate for all cases. A revised calculation is described above.

"The PUC has done all it can do to fight wholesale energy prices that are unjust and unreasonable," said commission President Loretta Lynch. "We maintain the responsibility to keep the lights on. . . . I believe that adding another 3 cents will comprehensively address the need for revenues."

The commission took steps to have utilities begin paying the state Department of Water Resources for the nearly $3 billion in power it has purchased for them since mid-January.

The PUC also ordered utilities to start paying for future power from alternative energy producers who are starved for cash and struggling to operate. The blackouts last Monday and Tuesday were precipitated in part by loss of power from such companies.

But it was the rate increase proposal that packed the auditorium at PUC headquarters. And the drama of the vote--and the vocal opposition--spurred each of the five commissioners to forcefully defend the unpopular action.

"These are extraordinary moments in California's history," declared Commissioner Geoffrey Brown, a recent appointee of Gov. Gray Davis. "And extraordinary moments require extraordinary courage. Loretta Lynch has taken a lot of bad hits. But it was she who stepped up to the role of leader in California."

Rate Increase Lacked Support

Lynch proposed the rate increase, even though an administrative law judge at the PUC concluded that an increase was unnecessary and the PUC's own consumer protection arm, the Office of Ratepayer Advocates, opposed it. She also did not have the public support of Davis, who appointed her and two other commissioners.

Davis has distanced himself from the PUC's action, saying the commission was acting independently and that he remains unconvinced that a rate increase is necessary.

Commissioners Henry Duque and Richard Bilas--who were appointed by Republican Gov. Pete Wilson--called the rate hikes long overdue.

"Unless ratepayers want to face substantial rolling blackouts this summer, we have to start paying our power bills," Duque said. "It cannot be done with the current rates."

Saying "there is just no blood left in the turnip," Bilas warned that "absent an immediate rate increase, the utilities will be in Bankruptcy Court."

Before the vote, sign-carrying protesters chanted, "Rate hikes, no way, make the energy companies pay." And the commission heard a parade of witnesses, most opposing the rate increase. Some called on the state to use eminent domain to seize power plants, as Davis said he might do as a last resort.

Doug Heller, of the Foundation for Taxpayer and Consumer Rights in Santa Monica, told the commission, "Go to these power pirates and tell them the state treasury is not their money orchard."

Barbara George, of Women's Energy Matters, said, "We should give the generators 24 hours to sign their plants over to the state and leave." George was one of several people ejected for repeatedly disrupting the meeting.

At a hearing Monday, representatives of agriculture and manufacturing industries warned that the increase would hurt their members and the California economy.

The rate hike is the state's largest, according to the Office of Ratepayer Advocates, which researched the issue.

Because the electricity rate is just one of many charges on a monthly utility bill, the overall effect will be about a 28% increase in monthly bills, said PUC staff.

Before the PUC action, homeowners and renters in Edison territory paid 7.2 cents per kilowatt-hour for electricity and another 5.3 cents per kilowatt-hour for other services. The new rate, totaling 15.5 cents per kilowatt-hour, boosts the overall bill by about 24%. The increase is about 26% for PG&E residential customers. But under Lynch's proposal, those increases would not be applied equally.

To encourage conservation, she seeks a tiered system that would charge miserly consumers of energy no more than current rates but would impose the new higher rates on bigger users.

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