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PUC: State can raise rates to finance power purchases
Posted at 6:40 a.m. PST Thursday, March 8, 2001
BY KAREN GAUDETTE
Associated Press Writer
SAN FRANCISCO (AP) -- Power regulators have ruled that the state can raise electricity rates to recoup $3.2 billion it has spent on behalf of two struggling utilities -- but the Davis administration said it will not likely ask customers to pay more.
The Department of Water Resources began spending taxpayer money in January to purchase power for customers of Pacific Gas and Electric Co. and Southern California Edison Co., both denied credit by electricity wholesalers.
But the department has said it needs money from utility ratepayers to show power suppliers that it has multiple options to pay for the power it will need to keep the lights on in California.
On Wednesday, the California Public Utilities Commission ruled that the DWR can recover the $3.2 billion -- and any future money it spends -- by raising utility rates.
``It does confirm for the credit managers and for the companies that I've been negotiating with that come what may we are going to be able to repay our bills,'' said David Freeman, a DWR power adviser.
In a 4-1 decision, the PUC said the DWR can use the money Edison and PG&E collect from ratepayers to reimburse itself for power purchases. The DWR can either collect the money directly from the utilities, or, if they don't have any cash, the DWR could force the rate hike.
Steve Maviglio, a spokesman for Gov. Gray Davis, said the state is simply following current law to make sure it gets reimbursed.
The PUC is investigating how much money PG&E and Edison earn from customers' rates after they pay for power generation, contracts with environmentally friendly power plants and other expenses. Though Edison declined comment, PG&E already has said it has nothing left after those costs are subtracted.
Maviglio said that despite PG&E's claim of no extra cash, the risk of rate hikes is low because the PUC already raised rates 7-15 percent in January and because a 10 percent deregulation-imposed rate cut will expire next year.
Davis has said repeatedly he is confident of resolving California's power crisis within the existing rate structure.
The Legislature and Davis extended the PUC's increases for up to a decade to help pay back the estimated $10 billion in power-buying the state expects to do for Edison and PG&E over the next several years, and finance its purchase of the power lines owned by the two companies and San Diego Gas & Electric.
The state plans to issue revenue bonds in May to help cover its power-buying; Edison and PG&E ratepayers will help pay those off.
``It's necessary for us to have taken this action in order to create confidence in the investment community that the state will be able to make payments and issue bonds,'' said PUC Commissioner Carl Wood.
PG&E and Edison say high wholesale power costs and the inability to pass them on to their customers because of a state-mandated rate freeze have dragged them more than $13 billion into debt.
State legislators are working on several remedies, including incentives for conservation and power plant construction.
Davis earlier this week announced the signing of 40 long-term contracts and other agreements between the DWR and power suppliers to keep power flowing to utility customers for the next decade at costs far below those the state is now paying on the spot market.
Critics of Davis' plan say when power costs drop, utility customers will actually pay more for electricity at the locked-in prices.
If large businesses reach contracts with large suppliers on their own, residential and small-business customers would have to cover the state's bill, said Nettie Hoge, founder of The Utility Reform Network.
Hoge fears lawmakers will try to undo a requirement they recently passed that makes Edison and PG&E customers stick with the utilities. By a 3-2 vote, the PUC elected not to discuss the direct-access issue.
The PUC also decided against acting on a motion filed by California utility workers asking that the PUC prohibit PG&E and Edison from laying off 3,000 electrical and customer servicer workers.
An PUC administrative law judge recently ruled that such layoffs are unacceptable because they could mean busy signals when customers call to report outages and lengthy service waits. The utilities said layoffs would cut costs and help prevent them from slipping further into debt.
The commission plans to revisit the issue at next week's regular meeting. Consumers told the commission of their frustration with the postponement of projects such as plans to bury power lines underground to improve safety and appearance.
-- Swissrose (email@example.com), March 08, 2001