CA Regulators Suspend Direct Access, Okay Rate Changes

California's sharply divided energy regulators last Thursday suspended direct access to retail electric customers in the state and okayed one other major rate change necessary to begin the process of selling $13 billion in state electricity revenue bonds. The actions were effective immediately and allow existing direct access customers to continue their current arrangements.

The vote on direct access was 3-2, reflecting the deepening split between three regulators appointed by Gov. Gray Davis and two Republican holdovers appointed by the previous governor, Pete Wilson, a loud critic of Davis' handling of the state's ongoing electricity problems.

Before the vote, California Public Utilities Commission President Loretta Lynch told her colleagues that the state senate has requested an assessment from the CPUC by Jan. 1, 2002, outlining when and under what circumstance retail customer choice might be resumed in the state.

On other matters, the CPUC put an "interim" electric rate in place (4-1 vote) for San Diego Gas and Electric Co. to place it essentially on the same level as its two counterpart private-sector utilities that were granted 3-cent/kW increases earlier in the year, and all three need the added retail charges to provide revenue to the state Department of Water Resources (DWR) to pay off the upcoming state bonds.

In an 11th-hour move surprising Lynch, a maverick 3-2 majority of the regulatory commission voted to hold a rate agreement between DWR and the CPUC to facilitate the state agency being given unprecedented access to retail electric rate revenues to repay the California treasury for billions of dollars used to purchase wholesale power supplies for the financially crippled private sector utilities.

This item, along with a more controversial proposed revenue requirement and rate-setting for DWR that had already been held, will be considered at the CPUC's next regularly scheduled business meeting next month.

Lynch's colleague Carl Wood championed the suspension of direct access as essential to "assist the state treasurer in issuing bonds by assuring that there is a stable customer base to assure the recovery of the funds," and in addition, to "eliminate the potential for significant stranded costs associated with DWR's contractual commitments" locking the state in to long-term power contracts that may over time prove to be substantially above market.

To continue to offer direct access in this environment, Wood said, would effectively offer some customers "a subsidy," and one that smaller, mass consumers would be the least able to take advantage of.

The two Republican Commissioners, including former CPUC president and free-market economist, Richard Bilas, strongly opposed the move and said they would file dissents.

In two other unrelated items, the CPUC unanimously approved a plan by Sempra Energy to eventually merge its two utilities Southern California Gas Co. and SDG&E, and it approved a time-of-use rate for a real-time metering program among the state's larges electric customers (200 kW or greater loads).

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