California utilities seek billions in relief from high costs

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California utilities seek billions in relief from high costs

By JOHN HOWARD, Associated Press

SAN FRANCISCO (October 4, 2000 11:23 p.m. EDT http://www.nandotimes.com) - Saying the company is losing $1 million per hour from skyrocketing wholesale energy costs, Pacific Gas and Electric Co. asked state regulators Wednesday for permission to pass $2.2 billion in losses onto its customers.

A similar move is being planned by Southern California Edison Co. as California's public and private energy companies grapple with changes stemming from the state's deregulated electrical power market.

The power woes started this summer with skyrocketing power prices in the San Diego area, which is served by San Diego Gas and Electric. That prompted the larger northern utilities to take steps to fend off similar spikes.

PG&E, which serves 4.5 million people living between Bakersfield, Calif., and the Oregon border, told the Public Utilities Commission on Wednesday that its petition was prompted by the "extraordinary and unforeseen crisis in wholesale retail power markets in California."

Unless the PUC acts, the utility "and its customers face a deepening regulatory and financial crisis over the rapidly growing mountain of debt PG&E is incurring to buy power in wholesale markets in order to serve its customers," the company said in its petition.

SoCal Edison, which serves about 4.3 million customers, planned a similar request as early as Thursday, according to a company executive who spoke on condition of anonymity. The company is absorbing losses slightly lower than PG&E's.

The two huge utilities, bound by rate freezes, are not able to pass their energy costs onto their customers, and they have been absorbing hundreds of millions of dollars in costs monthly.

Under the deregulation scheme, investor-owned utilities must operate with a rate freeze until they sell off their assets as required by the 1996 law.

The PUC said earlier that if the utilities have losses on their books when the deregulation transition period ends - no later than March 2002 - the companies will have to eat the costs.

But the utilities want the PUC to reconsider that decision at its Oct. 19 meeting, which could allow them to carry over those losses into the future.

Meanwhile, the California Municipal Utilities Association, a group that represents more than 28 publicly owned electricity utilities, called for a cap on wholesale power costs.

The group, known as CUMA, also urged a restructuring of the Independent System Operator - the Folsom, Calif.-based board that manages most of California's power grid under the state's 1996 deregulation law. The group is composed of representatives of private utilities, marketers, power generators and others.

The ISO coordinates power usage, tracks the state's electrical energy grid and can curtail or cut electrical energy availability when the system's reserves drop dangerously.

The public utilities said ISO should be replaced with a publicly owned and nonprofit entity limited to power management with no role in marketing.

"We think a public agency with oversight and sunshine is the appropriate form," said Tony Braun, a legal adviser to the municipal utilities' group.

"The transmission operation is still a monopoly function. We don't believe a for-profit entity will do the best job operating a monopoly function," Braun said.

San Diego Gas and Electric Co., with 1.2 million customers in San Diego and southern Orange County, was the first utility in the state to buy power on the open market under the 1996 California law deregulating the electric industry.

The utility, its rate cap removed, faced spikes in wholesale energy costs and passed those on to its customers, prompting a doubling and tripling of local utility bills.

PG&E and SoCal Edison say similar increases await their customers, absent state or federal action, or an easing in the costs of wholesale electricity.

http://www.nandotimes.com/noframes/story/0,2107,500265748-500412363-502524414-0,00.html



-- Martin Thompson (mthom1927@aol.com), October 05, 2000

Answers

This is an unbelievable mess. $1 million per hour in losses? There's no way any large corporation, no matter how deep the pockets, can long withstand losses like that.

-- Billiver (billiver@aol.com), October 05, 2000.

The PUC of California says PG&E is going to have to eat those losses until March, 2002? If they lost $2.2 billion, just over the summer, how can they possibly afford to do that? Looks to me like a major U.S. corporation is about to fly apart.

-- QMan (qman@c-zone.net), October 05, 2000.

If I were an investor in the Dow Utility Index, I think I would soon divest.

-- Uncle Fred (dogboy45@bigfoot.com), October 05, 2000.

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