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Rate Increases Salvage CA Utilities from Brink of Bankruptcy
Reluctantly and in the face of extraordinary pressure fromfinancial, utility and public officials, California regulatorsThursday took initial steps to unfreeze retail electricity ratesfor the state’s two largest investor owned utilities (IOUs) tobegin to cut into the $8 billion of debt dragging down the IOUssince mid-year. An unprecedented lobbying and public communicationseffort by the utilities preceded the action.
The California Public Utilities Commission on a 5-0 vote okayedan expedited two-week fact-gathering process that is supposed tolead to rate relief being given to the two utilities Jan. 4.Whether this will satisfy the financial community and ratingservices breathing down the utilities’ balance sheets was notimmediately clear.
Former CPUC president and economist, Richard Bilas raised thatquestion while noting he had no clear answer.
Emergency hearings designed to get a rate decision a week laterwill be held Dec. 27-28.The regulatory commission will use anindependent auditor to look at the two utilities’ financial recordsto determine that the rate freeze can be lifted.
In its order, the CPUC committed itself to expedited action toboth “ensure that the utilities can provide service at just andreasonable rates” and “to avoid continuing conditions that mayjeopardize the utilities’ creditworthiness and their ability tocontinue to procure energy on behalf of consumers.”
Without rate relief, both Southern California Edison Co andPacific Gas and Electric Co. said they will not be able to buyadequate power supplies and, therefore, “electricity rationing”would become necessary in the form of rolling blackouts.
Commissioner Carl Wood said billions of dollars are being suckedout of California’s economy in order to feed the “greed and avariceof the corporations (generators and marketers) that have no respectfor their obligations under law even if the officials (FERC)charged with assessing those obligations don’t do it. Theirobligation is to provide electricity at rates that are just andreasonable.”
He said the long-term solutions to California’s wholesaleelectricity market problem cannot be implemented withoutunderstanding who is causing the problems.
Bilas added he hopes the CPUC’s assessment is correct, “and thatwe’re not too late.”
CPUC President Loretta Lynch, an appointee of current Gov. GrayDavis, reiterated that FERC’s inadequate actions or inactions inrecent weeks and months have “contributed to a five-fold increase”in the cost of power.
Under the circumstances, PG&E and Edison have been “pushedto the breaking point,” Lynch said, noting that eventually thestate legislature is going to have to act quickly to restore someof the CPUC’s past powers to deal with the restructured electricityenvironment. She said not only are the utilities placed injeopardy, but the future integrity of the state’s electricityinfrastructure is endangered.
Lynch took great pains to address “the market,” saying the CPUCwas “taking substantial action” to the full limits of its abilityto do so under the state’s 1996 electric industry restructuringlaw.
“We have a legal trust to keep the lights on at reasonableprices if we can, so we call upon the market to recognize that weare taking substantial actions…to resolve this issue. The FERC’sactions have made it extraordinarily difficult for this commissionto fulfill that obligation.
A Los Angeles state legislator heading the state Assemblyenergy/utilities committee, Roderick Wright, appeared before theCPUC to urge them to act. He suggested that less finger-pointing bedone in the wake of the current crisis until longer term remediescan be addressed.
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