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Edison seeks to call off a rate increase

Turns out the utility has surplus revenue from overestimating its costs and over-collecting.

December 21, 2006|Elizabeth Douglass | Times Staff Writer

Southern California Edison Co. asked regulators Wednesday to cancel an electricity price increase set for Jan. 1 and to lower some current rates -- a move it can afford to make because this year's bigger customer bills and lower-than-expected natural gas prices left the utility with more than $300 million in surplus revenue.

The cancellation of what would have been a third rate hike in the last year would provide a respite for the utility's 4.6 million household and business customers.

Many users were hit during the year with hefty rate increases granted to the utility to cover its projected costs for natural gas -- the fuel used to generate much of the state's electricity -- and to fund infrastructure upgrades. Customers were surprised and even outraged when the summertime heat wave sent their air conditioners into overdrive and their bills soaring further.

Now, as the utility and regulators complete their year-end accounting, it turns out they substantially overestimated the cost of natural gas, and underestimated how much the utility would collect from customers.

Edison's new rate proposal for 2007, expected to win approval from state regulators next month, eliminates a planned 6% rate increase. The company, a unit of Edison International of Rosemead, also asked the California Public Utilities Commission to reduce the rates paid by households that use larger amounts of power.

Those higher rates kick in whenever customers use more than a modest baseline amount of power and then increase substantially when households exceed certain usage benchmarks.

"The past year has been a very difficult one for many of our customers because of higher utility costs and rates," said Lynda Ziegler, the company's senior vice president for customer service. "We are especially pleased to provide some good rates news during this holiday season."

Bob Finkelstein, executive director of the Utility Reform Network in San Francisco, was less enthusiastic.

"I'm going to sound a little bit like the Grinch ... but I'm a little surprised that Edison would treat this as a big deal," he said. "They focus on the fact that [rates] are not going to jump higher -- well, that's fine except that we're still reeling from the increases that are already on our bill and that are going to remain."

What's more, Finkelstein said, Edison is merely doing what regulators require utilities to do when they over-collect from customers: give back the excess money through bill credits or use it to lower rates or offset planned increases.

Edison's residential customers pay an average of 14.9 cents for each kilowatt-hour of electricity they consume. That average price -- already 22% higher than year-earlier levels -- would have jumped to 15.9 cents under the planned rate hike, bringing the cumulative rate increase to 30% during the last year.

Under the revised plan, the average residential rate would tick up to 15 cents per kilowatt-hour, but the average monthly bill would stay roughly flat at $85 instead of jumping to $91. Households with big power bills would see rates fall 2% to 11%, depending on usage, Edison said.

The company expects the changes to take effect with February bills.

When the year started, regulators estimated the cost of natural gas, projected 2006 sales and costs, and then approved Edison's planned rate increases based on those assumptions. At the end of each year, Edison and the commission adjust rates based on revised sales and cost forecasts and whether the utility over-collected or under-collected from customers.

The overage for 2006, which Edison estimated to be $300 million to $350 million, was enough to allow for postponing the planned rate increase from August to January and now canceling it outright, as well as fund a reduction in some rates for 2007.

"We had a statewide heat storm, and all the utilities over-collected because of it," said Finkelstein of the Utility Reform Network. Pacific Gas & Electric Co., the PG&E Corp. utility that serves Central and Northern California, opted to give its surplus back to customers through a one-time bill credit, he said.

"We actually prefer the way Edison's doing it," Finkelstein said. "If nothing else, it helps stem the rising tide we've seen in rates, and maybe it creates a little momentum for getting rates to start going lower."

Edison shares rose 7 cents to $45.80. They have traded in a range of $37.90 to $47.15 in the last year.

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elizabeth.douglass@latimes.com

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