CA Utilities Ask to End Rate Freeze
Responding to state regulators, California's two largest
electric utilities in separate filings last week proposed that the
state end the four-year-old rate freeze and permit them to buy more
supplies outside of the state-chartered wholesale spot power market
as a means of bringing down excessively high wholesale prices. Part
of the means of bringing stability would include rate increases for
the utilities and price caps for merchant generators and marketers
selling electricity in California.
As they have done at the federal level, both utilities repeated
that "prompt action (by the California Public Utilities Commission)
is essential" to stabilize the current troubled electricity
restructuring and develop longer-term solutions. CPUC action is
expected by the end of this year.
The essence of both filings will be reiterated by the utilities
in an opening CPUC hearing in San Francisco that starts the
regulators' formal examination of the revenue under-collection
issue and related wholesale price spike issues.
Southern California Edison Co. and Pacific Gas and Electric Co.
took the separate actions as part of the state regulators'
examination of the utilities' now-$5 billion under-collections of
wholesale power costs they have paid since June that greatly
exceeded the frozen rates they have collected from customers.
Edison proposed a four-point program, including a "modest rate
increase not to exceed 10%" beginning Jan.1, 2001. PG&E's
utility suggested transferring the under-collections to a new
balancing account, determining post-freeze rates and establishing
rate stability for retail customers "that will soften the
volatility of market prices for wholesale power while allowing the
utility to fully recover such costs over a reasonable period of
Both utilities directly countered proposals by a statewide
utility consumer watchdog group, TURN, that monies collected as
part of the stranded cost recovery charges, which amount to
billions of dollars, be applied to the under-collections. Both
utilities also asked for a determination on the long-term
disposition of their remaining hydroelectric and nuclear generation
The bottom line for both utilities is obtaining the CPUC's okay
to recover the wholesale power cost under-collections after the
rate freeze is lifted-authority that California's other major
investor-owned utility, San Diego Gas and Electric Co., already has
as part of retail rate price cap law passed by the state
legislature in August specifically to give relief to SDG&E's
Beyond that threshold, Edison and PG&E differ somewhat in
"PG&E is willing to lend its financial resources to help its
customers work through the time required to pay down these
unrecovered costs through a sensible rate stabilization program and
possibly through reasonable accounting mechanisms other than those
proposed here," the utility's filing stated.
"However, PG&E is fundamentally opposed to any strategy
which conveniently changes the accounting and ground rules now and
leaves the company holding the bag for these costs-whether they are
called stranded transition costs or stranded non-transition costs."
One of the four points in Edison's filing, reiterated in a
telephone press conference Thursday by CEO Stephen Frank, asks the
CPUC to "confirm that utilities will be permitted to recover their
reasonable procurement costs incurred on behalf of customers." (The
utilities want this assurance for the financial community, and in
their parent companies third quarter earnings reports this week
there were no charges taken for the under-collections, contrary to
SDG&E's parent, Sempra Energy, which yesterday announced a $30
million charge against utility earnings.)
Edison also stressed that the CPUC should complete its review of
several bilateral contract deals totaling 500 MW that it has before
the regulators as part of a broader effort to "support market
Richard Nemec, Los Angeles