CA Legislator Urges Rejection of Edison Hike
California state Sen. Steve Peace last week asked state energy
regulators to reject utility attempts to recover through retail
rates the under-collections from the continuing wholesale power
price spikes and instead get the funds from generators and
marketers who are charging the market-based prices.
In a strongly worded, four-page letter, Peace asked Loretta
Lynch, president of the California Public Utilities Commission, to
"vigorously contest any legal attempts to force" recovery of the
charges in utility rates and instead "order utilities to exhaust
their legal remedies to obtain refunds from all parties who were
the beneficiaries of the proceeds of the unlawful wholesale
charges" incurred by the investor-owned utilities.
California's electric stakeholders are predicting a special
session of the state legislature early next year to smooth the
continuing rough edges of the state's 1996 electric industry
restructuring law that is at the center of the debate surrounding
the uncollected wholesale charges. A filing was made last Friday by
Southern California Edison Co. to the CPUC to increase retail rates
9.9% and end the four-year-old rate freeze mandated in the '96
Technically, Edison officials maintain that its rate freeze
ended in August when it posted valuations of its remaining
generation assets in appropriate balancing accounts established by
the CPUC. Nevertheless, the five-member CPUC has continued to
refuse to end the freeze at a time when wholesale power prices
continue to stay more than twice above their historic levels.
With retail rates frozen well below what wholesale power rates
have been averaging for the past six months in California, Edison
and the other major utilities have accumulated more than $5 billion
in uncollected charges. Edison's filing with the CPUC last Thursday
(Nov. 16) proposes to collect the charges over a five-year period,
beginning Jan. 1, 2001, noting in its filing and media briefing
that "the urgency of the situation combined with the refund
flexibility justify such action."
In addition to asking for an end to the rate freeze, Edison
wants a 9.9% increase as a "rate stabilization" mechanism and
provision for future increases if wholesale power prices continue
to exceed the utility's retail rate levels, which it proposed to go
back to pre-freeze 1996 levels of about 10.5 cents/kwh. Edison
officials said they don't expect the high wholesale prices to
continue once the federal and state remediation measures now being
formulated are put in place, including possible state legislative
action next year.
Both the utilities and Sen. Peace are relying on legal
interpretations of state and federal laws. Peace told Lynch that
usual "filed-rate pass through doctrine" does not apply in
California's case because the charges in question were not based on
"FERC-approved contracts" but rather a market-based mechanism
approved by the federal regulators.
"When a 'market-based' tariff proves to be vulnerable to the
exercise of market power and thus fails to produce the just and
reasonable rates intended by FERC, those rates are unlawful and
thus not subject to the field rate doctrine," Peace said in his
letter to the CPUC.
Edison's senior vice president for public affairs, Bob Foster,
said last week that ending California's rate freeze and stabilizing
rates does not require additional state legislative action, noting
his utility hopes the matter will be dealt with administratively by
the CPUC under the existing laws.
"Edison's proposed rate increase and stable pricing structure
compares favorably to the unacceptable alternative of exposing
customers to market-based prices and volatility," Foster said. "At
current prices, customers would have been exposed to a 45% hike in
residential electricity rates."
Edison officials said the utility informed the CPUC that it
would "continue to provide customers with a buffer against
wholesale price spikes" and that no additional rate increases would
be needed to recover the under-collections.
Edison also acknowledged that there are larger, longer-term
issues concerning the utility's future role in electric industry
restructuring, and those issues should be addressed in a
longer-term second phase to its rate request. Issues such as
Edison's role as a utility "default provider" for bundled customers
and its ownership of future generation need to be reviewed over a
longer time period, for which the under-collection issue cannot
wait, according to Edison's CPUC filing.
Richard Nemec, Los Angeles