Consumers and utilities continued to butt heads in Californialast week over how to deal with almost $5 billion in uncollectedrevenues by the state’s three major investor-owned utilities in thewake of this summer’s wholesale electricity price spikes. Withretail rates frozen the utilities have only collected a portion ofthe added cost of power since May. Consumer activists in SanFrancisco and San Diego last Tuesday launched a campaign againstthe utilities seeking pledges from political candidates throughoutthe state to promise to oppose the utilities’ attempts to raiseconsumer rates to recover their costs.

On Friday, with only one day left in which to act, CaliforniaGov. Gray Davis was expected to drop a state legislative measureproviding up to $150 million in taxpayer funds to help make wholeSan Diego Gas and Electric Co. over the next three years. Understate law, the governor had until the end of the day Saturday tosign or veto the measure; otherwise it dies through inaction.

A spokesperson in the governor’s office noted Friday morningthat Gov. Davis had not acted on the measure and there were noplans at the time for him to act, although he was still wadingthrough several hundred unsigned bills — after starting the weekwith 1,400 pieces of new legislation.

“It is time for our elected representatives to say ‘no’ to thesecompanies,” said Nettie Hoge, head of The Utility Reform Network(TURN), a San Francisco-based utility consumer watchdog group, whoargues that California’s three major utilities have collected morethan $14 billion in revenues to cover their stranded costs, morethan enough to offset the under-collections this summer. Theutilities 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 toprevent any utility rate increase while the state-mandated retailrate freeze is still in effect and to oppose attempts to “end therate freeze retroactively “and/or require consumers to pay anythingmore for electricity costs allegedly incurred” by the utilities.

In separate federal financial filings and upcoming stateregulatory requests, California’s two largest utilities, PacificGas and Electric Co. and Southern California Edison Co., areseeking assurances the monies will be eventually recoverable inutility rates and not left to be absorbed by shareholders. Bothutilities are suggesting that under the state’s 1996 electricityindustry reform law they could now pay off their so-called strandedcosts so a four-year-old retail rate freeze could be lifted. Thatwould allow them to recover the full cost of power supplies inretail rates that would vary with the market as San Diego Gas andElectric Co. was doing prior to this summer’s correctivelegislation re-capping San Diego retail rates.

PG&E’s utility filed with the Securities and ExchangeCommission Sept. 13 saying that when crediting even conservativelyagreed-upon values of its vast hydroelectric system to itsremaining stranded costs, it could unfreeze rates and move on.SoCal Edison made a similar SEC filing Tuesday, contending thatstate regulators have wrongly “denied requests to allow recovery oftransition revenue account undercollections after the end of thestatutory rate freeze.”

In its SEC filing, Edison said in a move to assure the financialcommunity that “based on historical experience,” the CaliforniaPublic Utilities Commission will support the utilities’ costrecovery “as it supported cost recovery during the oil price shocksof the 1970s.”

Both utilities are concerned that the CPUC is misinterpretingthe 1996 state electricity law in assuming that the utilities canbe left liable for uncollected power supply costs at the time ratesare unfrozen. They argue that only the unrecovered stranded assetcosts are at risk, saying they should be made whole on the pricesthey pay for wholesale power because it is a pass-through on whichthey make no profit. Both utilities said they would file with theCPUC next week to recover the uncollected electricity procurementcosts, now said to total more than $4 billion for the two.

PG&E also has turned to the courts, most recently making aplea to the state supreme court attempting to get the authorizationto charge customers the full cost of power once the freeze islifted and to apply excess stranded cost recovery dollars to theuncollected power supply costs. Edison said it might make similarcourt filings.

In addition to upcoming CPUC filings and past ones giving themmore borrowing authority to pay off the undercollections, the twoutilities 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 thismonth to the ongoing CPUC investigation of this summer’s pricespikes.

“The joint resolution requires the CPUC to review the impact ofthe current electricity crisis on consumers and Californiainvestor-owned utilities with emphasis on options for correctingthe electricity market, methods to eliminate price volatility forconsumers, and methods for cost recovery and cost allocation,”Edison said in its SEC filing this week.

Richard Nemec, Los Angeles

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