After a day’s delay for some last-minute horse-trading, California regulators decided Tuesday to spread a $5.7 billion (3-cent/kW) rate increase to both moderate and large energy users to encourage power conservation going into the critical summer peak-demand period. The increase, which was okayed March 27, takes effect June 1 for Pacific Gas and Electric and June 3 for Southern California Edison with five “rate tiers” tied to consumption levels.
California Public Utilities Commission (CPUC) Energy Director Paul Clannon called the increases the largest in state history. The vote was 3-2, with Gov. Gray Davis’ three appointees backing it. The two holdover Republican-appointed commissioners voted against the measure, contending that it separates out too many factions for either no increase or too much of the burden of the increase.
At one point prior to the vote, angry consumer protesters tried to shout down the commissioners at a special continuation meeting. Monday the regulators’ regular business meeting in San Francisco was delayed for an hour as a parade of consumers protested rate hikes and called for the state to seize the energy infrastructure, including the private sector power plants. One group calling themselves “the rate-busters” claimed the generators had “a gun to the head” of California consumers and must be stopped. Many threatened a ratepayer revolt, withholding or diverting monthly utility payments.
Under the CPUC’s action residential customer increases will average 19%, compared to 49% for industrial customers; however, many special exemptions and “caps” are provided to protect low-income and many residential customers from any increase and to keep agricultural customers increases under 30%. (While the non-residential increases are much larger, industrial rates will remain lower than those paid by smaller customers.) Part of the proposal would place federal facilities in the state on real-time, spot market prices as a means of making them live with current FERC policies against wholesale price caps, but several of the commissioners, including Davis appointees, indicated they will revisit this part of the decision.
Davis said he thought his proposal that would have the average increase be 26.5% for all customers, with half of the residential users seeing no increase, was a better way to go. He made his proposal April 5 in a statewide address on California’s stubborn energy crisis.
CPUC President Loretta Lynch, a close confidante of the governor, continued to blame inaction on wholesale power price caps by federal regulators as the principal reason why California is having to increase rates for its two major private sector utilities by about $5 billion annually. Other state officials and energy industry stakeholders already are saying the increases will not be sufficient because they have been delayed for months in becoming effective.
In preparing for this latest rate action, Lynch last week outlined her principal goals for the rate spread as being: (a) encouragement of conservation, (b) paying the state water resources department, which has been burning through the state’s budget surplus to buy spot supplies daily at more than $50 million/day, and (c) protect low-income customers by giving them and low-use residential customers an exemption from the increase.
Under the process approved Tuesday, the largest home users will see a 50% rate hike, and about half of all residential customers will fall in the exemption categories — by income status or low usage. There will also be a provision for the use of time-of-use meters to “aggressively encourage reductions in on-peak usage,” Lynch said.
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