CA Utilities, Regulators Spar Over Revenue Under-Collection Issue
Consumers and utilities continued to butt heads in California
last week over how to deal with almost $5 billion in uncollected
revenues by the state's three major investor-owned utilities in the
wake of this summer's wholesale electricity price spikes. With
retail rates frozen the utilities have only collected a portion of
the added cost of power since May. Consumer activists in San
Francisco and San Diego last Tuesday launched a campaign against
the utilities seeking pledges from political candidates throughout
the state to promise to oppose the utilities' attempts to raise
consumer rates to recover their costs.
On Friday, with only one day left in which to act, California
Gov. Gray Davis was expected to drop a state legislative measure
providing up to $150 million in taxpayer funds to help make whole
San Diego Gas and Electric Co. over the next three years. Under
state law, the governor had until the end of the day Saturday to
sign or veto the measure; otherwise it dies through inaction.
A spokesperson in the governor's office noted Friday morning
that Gov. Davis had not acted on the measure and there were no
plans at the time for him to act, although he was still wading
through several hundred unsigned bills --- after starting the week
with 1,400 pieces of new legislation.
"It is time for our elected representatives to say 'no' to these
companies," said Nettie Hoge, head of The Utility Reform Network
(TURN), a San Francisco-based utility consumer watchdog group, who
argues that California's three major utilities have collected more
than $14 billion in revenues to cover their stranded costs, more
than enough to offset the under-collections this summer. The
utilities contend that is mixing apples and oranges.
In appealing to elected officials and prospective officeholders,
TURN and several allied consumer groups are asking the officials to
prevent any utility rate increase while the state-mandated retail
rate freeze is still in effect and to oppose attempts to "end the
rate freeze retroactively "and/or require consumers to pay anything
more for electricity costs allegedly incurred" by the utilities.
In separate federal financial filings and upcoming state
regulatory requests, California's two largest utilities, Pacific
Gas and Electric Co. and Southern California Edison Co., are
seeking assurances the monies will be eventually recoverable in
utility rates and not left to be absorbed by shareholders. Both
utilities are suggesting that under the state's 1996 electricity
industry reform law they could now pay off their so-called stranded
costs so a four-year-old retail rate freeze could be lifted. That
would allow them to recover the full cost of power supplies in
retail rates that would vary with the market as San Diego Gas and
Electric Co. was doing prior to this summer's corrective
legislation re-capping San Diego retail rates.
PG&E's utility filed with the Securities and Exchange
Commission Sept. 13 saying that when crediting even conservatively
agreed-upon values of its vast hydroelectric system to its
remaining stranded costs, it could unfreeze rates and move on.
SoCal Edison made a similar SEC filing Tuesday, contending that
state regulators have wrongly "denied requests to allow recovery of
transition revenue account undercollections after the end of the
statutory rate freeze."
In its SEC filing, Edison said in a move to assure the financial
community that "based on historical experience," the California
Public Utilities Commission will support the utilities' cost
recovery "as it supported cost recovery during the oil price shocks
of the 1970s."
Both utilities are concerned that the CPUC is misinterpreting
the 1996 state electricity law in assuming that the utilities can
be left liable for uncollected power supply costs at the time rates
are unfrozen. They argue that only the unrecovered stranded asset
costs are at risk, saying they should be made whole on the prices
they pay for wholesale power because it is a pass-through on which
they make no profit. Both utilities said they would file with the
CPUC next week to recover the uncollected electricity procurement
costs, now said to total more than $4 billion for the two.
PG&E also has turned to the courts, most recently making a
plea to the state supreme court attempting to get the authorization
to charge customers the full cost of power once the freeze is
lifted and to apply excess stranded cost recovery dollars to the
uncollected power supply costs. Edison said it might make similar
In addition to upcoming CPUC filings and past ones giving them
more borrowing authority to pay off the undercollections, the two
utilities were able to get a joint state legislative resolution
(AJR 77) passed in the waning hours of the legislature last month,
and prompted the undercollection issue to be added earlier this
month to the ongoing CPUC investigation of this summer's price
"The joint resolution requires the CPUC to review the impact of
the current electricity crisis on consumers and California
investor-owned utilities with emphasis on options for correcting
the electricity market, methods to eliminate price volatility for
consumers, and methods for cost recovery and cost allocation,"
Edison said in its SEC filing this week.
Richard Nemec, Los Angeles