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State Orders Power Rebate of $1 Billion

A typical Edison home customer will get $40. Users of Sempra and PG&E also will benefit.

September 05, 2003|Nancy Rivera Brooks | Times Staff Writer

State regulators voted Thursday to refund $1 billion to customers of Southern California Edison and two other major utilities, a move made possible by lower wholesale electricity costs.

The one-time rebate will be about $40 for a typical Edison residential customer and will range from $100 to $300, on average, for a small business. Large industrial and commercial users will see significantly bigger refunds.

Customers of PG&E Corp.'s Pacific Gas & Electric Co. and Sempra Energy's San Diego Gas & Electric Co. will get similar refunds. The refunds for all three utilities will appear as a credit on customer bills starting in about two weeks.

Like the $1.25-billion rate reduction implemented last month for Edison customers, the latest giveback approved by the state Public Utilities Commission comes after a sharp decline in electricity prices since the darkest days of California's crisis of 2000-01.

"What we do today is take one step toward ending the energy crisis," Commissioner Geoffrey Brown said shortly before the five-member commission unanimously approved the refund. "This is an important step toward rate relief in California. It's too bad it had to happen in the first place."

The PUC implemented record rate increases in 2001 to pay for soaring spot-market electricity costs that pushed Edison and PG&E into technical insolvency. Since then, electricity costs have dropped thanks to long-term power contracts, federally mandated price caps and lower prices of natural gas, which is used to generate much of California's electricity.

The refund will come from cash amassed by the state Department of Water Resources, which was required to maintain a big reserve after it took over the task of buying power for the three utilities in January 2001.

The department has since turned power buying back to the utilities and no longer needs the money. The rebate had to be approved by the PUC.

The refund "is a clear indication that we have turned the corner, that the utilities are getting healthier, that the energy cartel's back has been broken in California and that we are on our way to more stable and more reliable supplies of power," said Richard Katz, energy advisor to Gov. Gray Davis.

Davis first pushed for the refund last May. Katz said the governor and state energy officials still want federal regulators to order $9 billion in additional refunds from energy companies for alleged electricity overcharges during the energy crisis.

The customer payback was structured as a one-time credit to avoid the time-consuming hearing process that is required when the PUC changes rates.

"The most important thing was to ... get money into the pockets of ratepayers that would be spending it in the California economy as quickly as possible," PUC President Michael R. Peevey said during a news conference at the commission's San Francisco office. "That's why we wanted to do it in a bill credit, in a lump-sum way, rather than dribbling it out over time."

Consumer activists, however, saw little cause for jubilation.

Harvey Rosenfeld, president of the Foundation for Taxpayer and Consumer Rights, noted that California electricity customers pay rates second only to those in Hawaii and "with no relief in sight."

Mindy Spatt, spokeswoman for the Utility Reform Network in San Francisco, said the refund represented the repayment of a loan without interest.

"There's no glory going to Gov. Davis or anybody else in basically returning consumers' money to consumers," Spatt said.

Michael Shames, executive director of the Utility Consumers' Action Network in San Diego, likened the payout to "offering a Dixie cup full of water to desert hikers suffering from dehydration. It won't quench our thirst for energy price relief, but it will allow us to survive another day."

Of the $1 billion being returned to ratepayers, $422 million will go to customers of Edison International's Southern California Edison utility. PG&E, which serves Central and Northern California, will get $444 million and San Diego Gas & Electric will get $135 million.

The money is being handed to the utilities in a share equal to the DWR costs borne by those utilities. Customers will receive rebates based on the number of kilowatt-hours they used during the last 12 months, multiplied by six-tenths of a cent per kilowatt-hour.

As a result, some customers will receive credits that are larger than their monthly bills, Peevey said.

For a medium business in Edison territory -- a large retail business or office building -- the projected credit will run between $840 and $2,100. A large manufacturer might get $50,000, while a large industrial customer, such as an oil refinery or concrete plant, might receive $240,000, Edison said.

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