Edison is seeking $794 million in additional ratepayer funds in each of… (Allen J. Schaben, Los Angeles…)
Reporting from Sacramento — To Southern California Edison, the $3.2 billion in rate hikes it wants on homes and businesses are vital to ensuring much-needed improvements to an aging electrical grid serving 14 million people and 285,000 companies.
But consumer advocates say Edison is being greedy. While conceding the utility has legitimate infrastructure costs, they say the rate hike proposal has been swollen with questionable allocations for pay raises and pensions.
An administrative law judge opened a two-day public hearing on the rate request in Los Angeles on Monday. The judge will make a recommendation this fall to the state Public Utilities Commission, which is expected to rule on the Edison request by early next year.
If approved, monthly electricity bills would jump about 9.1% for the average residential customer, who uses 600 kilowatt-hours of power a month. Low-usage customers — below 300 kilowatt hours — would see rates climb about 5.9%, while customers who use 900 kilowatt-hours or more would see their bills increase 11.1%.
Businesses would also feel the sting, although not as much as residents. The average small to mid-size business would see a 6.9% increase in monthly electric bills under the Edison plan. The average large industrial and commercial power consumers would pay 5.8% more, while agricultural users would see their monthly bills go up by 6.9%, Edison estimated.
At a time when Californians are struggling in a weak economy, Edison's request reflects "a stunning display of tone-deafness," the Utility Reform Network said. The San Francisco consumer group said Edison was putting its hand out as "nearly every other state business and resident [is seeking] ways to tighten their financial belts."
Siding with consumer groups, the PUC's independent Division of Ratepayer Advocates called the utility's request inflated, saying it's as much as 80% higher than it needs to be to cover operating costs and upgrades.
"Edison should be looking to trim its expenditures and be more sensitive to its customers," said Joe Como, the division's acting director.
Edison is the region's largest electric utility, serving most of Southern California with the exception of San Diego County and cities that have their own power service, such as Los Angeles. It is a subsidiary of Rosemead-based Edison International, which reported a profit of $200 million in its most recent quarterly earnings report.
Edison said it needed the rate hike to continue providing reliable service.
"Our objective is to preserve grid reliability and security while keeping rates as affordable as possible," said Russ Worden, the head of Edison's rate case team.
Edison's proposal calls for $794 million in additional ratepayer funds in each of the next three years, $155 million more in each of the second and the third years and an additional $515 million in the third year.
The state's four government-regulated electric and natural gas utilities can propose rate hikes every three years.
In May, the PUC slashed a rate hike request from Pacific Gas & Electric Co., which serves much of Northern and Central California. PG&E had sought a first-year increase of 19%, or about $4 billion, over three years, but the agency approved a first-year rate hike of 8.1%, or $1.7 billion over three years.
Edison hopes to do better by making a case that it needs more money to connect more customers and upgrade lines by burying them underground.
The company also wants to replace aging distribution and business systems, boost contributions to its employee pension fund to cover recession-related losses, upgrade computer anti-hacking software and ensure that employees' salaries remain competitive.
"We forecast what we need to operate the company," Worden said. "We have 100 witnesses who will swear under oath they need the money to maintain the business."
Edison said it was committed to continuing an eight-year project to upgrade its grid. So far, it has replaced 308,000 transformers, 87,000 power poles, 10,000 streetlights and 2,800 miles of underground transmission lines.
The Utility Reform Network, however, argued that Edison's rate request does much more than ensure safety and reliability. It's heavy with "higher administrative expenses, bloated executive pay packages and ridiculously expensive Internet toys," the group said.
TURN and other consumer advocates are protesting Edison's plans to spend hundreds of millions of dollars on Internet cyber security software and other upgraded information technology.
TURN also questions whether ratepayers should be on the hook for high salaries, bonuses and deferred compensation earningsthat swell the pay of top Edison executives.
"We think the amount Edison is asking for is pie in the sky and way above what is justified," said TURN Executive Director Mark Toney. "Hopefully, it's way more than they are going to get."
Edison counters that the salaries paid to top executives and rank-and-file workers are not excessive. A recent independent compensation survey, conducted for Edison and the PUC's Division of Ratepayer Advocates by Hewitt Associates, showed that total compensation — including base salaries, short- and long-term incentives and benefits — was 4.7% below market for firms that have comparable jobs.
Edison also said the request for increases in pension contributions is needed to make up for investment losses suffered during the financial crisis.
The Los Angeles hearing continues at 10 a.m. Tuesday at the Junipero Serra State Office Building, 320 W. 4th St., Suite 500. Hearings will also be held at the PUC's San Francisco headquarters Aug. 8 to 12 and Aug. 15 to 19.