With the convergence of regulatory, political and financial solutions for California’s investor-owned utilities heating up Monday in the state legislature and regulatory halls, questions about additional retail rate increases are being raised. Officials with Gov. Gray Davis are going out of their way to squash the notion that any more increases are imminent, on heels of 40% hikes earlier this year that just became effective in June.

Sponsors of the latest piece of electricity legislation, a re-regulation bill (AB 82XX), including the Speaker of the state Assembly, reiterated Monday that no rate increases for residential or business customers will be required by the proposed new law that would salvage Southern California Edison Co. by having the state buy its transmission system below market, but at two times its book value; allow direct access retail contracts for the largest utility users; and more closely regulate wholesale power charges and retail utility rates.

Noting that the proposed legislation that received its first hearing Monday in the state legislature will move retail rates “down rather than up,” Assembly Speaker Robert Hertzberg said the proposed new law is designed “to protect those who deregulation has hurt most–consumers–and ensures that California never sees a crisis like this again. It holds accountable those who have taken advantage of us.”

A similar legislative proposal on the senate side of the state legislature is scheduled to be debated today. Both proposals would expect merchant generators to discount what they are owed by California’s two major private sector utilities–Edison and Pacific Gas and Electric Co.–a notion that the generators’ publicly have consistently balked at, although privately some have indicated they would be willing to take so-called “haircuts,” depending on what they received in return.

Neither side of the state legislature has endorsed the April 9 agreement between Edison and the governor, although in the Assembly the sponsors say the governor’s deal provides the framework.

On a conference call last Sunday Davis’s top energy adviser, S. David Freeman, repeatedly told news reporters who asked that no rate increase will be needed in the next year or two based on current market assessments and the state’s long-term power contracts.

“In my opinion, rates are plenty high enough to cover the needs for the foreseeable future,” Freeman said.

Sufficient “noise” has been ringing through the political halls that late last Friday the president of the California Public Utilities Commission, Loretta Lynch, issued a prepared written statement to “dismiss” speculation that the regulators’ draft rate agreement released last Friday between the CPUC and the state water resources department (DWR) pointed toward additional retail increases.

Lynch said that hypothesizing rate effects without analyzing specific current data is “engaging in pure speculation. The commission has not yet received the final revenue requirement from DWR,” Lynch said. “Without such key information concerning DWR’s power purchase costs, it would be impossible to draw any conclusions regarding rates.

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