This ought to help the consumer sentiment in CA
Consumers voice rage, resignation over Calif
rate hike
By Andrew Quinn
SAN FRANCISCO, March 27 (Reuters) - California consumers reacted
with everything from rage to resignation on Tuesday as power regulators
approved one of the biggest electricity rate hikes in the state's history to
cope with its unfolding power crisis.
After a month which twice saw rolling blackouts ripple across the state, the
Public Utilities Commission (PUC) approved a strategy of tiered rate
increases to boost Californians' power bills by some 40 percent.
``We can't sustain this,'' said Nettie Hogue, executive director of The Utility
Reform Network (TURN), which has campaigned against consumer rate
increases. ``Even if low income customers don't pay it, goods and services
are going to increase. The economy cannot sustain this.''
The PUC's unanimous vote adds 4 cents per kilowatt hour to the monthly
bills paid by the 24 million Californians served by PG&E Corp.'s
(NYSE:PCG - news) Pacific Gas & Electric Co. and Edison International's
(NYSE:EIX - news) Southern California Edison utility subsidiary, both of
which have been forced close to bankruptcy by soaring wholesale energy
costs.
The higher rates are based on an average 30 percent increase on top of a
``temporary'' 10 percent rise in place since January, which the commission
today voted to make permanent. Together, they mark one of the largest rate
hikes ever imposed on the state's consumers.
For many Californians rising energy costs are an an infuriating sign of the
failure of their state's 1996 power deregulation effort, which was sold to the
public as promising to dramatically decrease the cost of power.
FINANCIAL DISASTER
Instead, it capped the prices that utilities were allowed to charge consumers, forcing them some $13
billion into debt and creating a financial disaster.
The hikes also came on the heels of repeated promises by Gov. Gray Davis not to raise rates. Davis as
late as Monday said he was taken aback by the PUC's plan for rate increases, and still hoped to squeak
by without boosting rates.
Davis spokesman Steve Maviglio said Tuesday the governor remained opposed to the move by the PUC
-- three of whose five members he appointed.
``The governor is opposed to the proposal voted on by the PUC today, but the PUC is an independent
body. We have no control over what they do.''
Davis critics dismissed this as a feeble excuse for a failed policy which has left California facing a summer
of critically short energy supplies, financially embattled utilities, and rolling blackouts like the ones which
struck twice last week.
``The PUC today served as the fall guy for Gov. Davis,'' said Doug Heller of the Foundation for
Taxpayer and Consumer Rights, a vocal critic of Davis and opponent of consumer rate hikes.
``We don't need it, we certainly don't deserve it and the public should not be forced to pay it,'' Heller
said. ``The governor's utter defiance of the public interest will lead to devastating rate increases for all
consumers.''
But while many expressed concern over the economic impact of higher power rates, the PUC's move
received backing from some major business organizations as pointing the only way out of the state's
energy emergency.
"If there are any 'silver linings' in these dark clouds, it is that price increases will help reduce demand this
summer, California Chamber of Commerce President Allan Zaremberg said in an open letter to members
Tuesday.
SUPPORT FOR MOVE
``Only by bringing supply and demand into balance will California be able to prevent blackouts.
Preventing blackouts is one of the California Chamber's highest priorities.''
The Silicon Valley Manufacturing Group (SVMG), representing some of northern California's most
powerful high-tech companies, also expressed support for the PUC move.
For many Californians, however, the prospect of higher power bills promised the further tighten the
screws on business and household budgets -- cutting profit margins and reducing cash available for
discretionary spending.
John Krause, a businessman who owns four San Francisco laundromats, said he had seen power bills
almost double over the past year, forcing him to cut the amount of drier time customers get for each
quarter. He said he would almost certainly have to pass more of the costs along as the summer rates bite.
``It is a major issue for me,'' Krause said. ``The worst thing is they seem to be doing it little by little...it is
a big hassle to keep changing the pricing on the equipment.''
And while Krause, like many other Californians, appeared resigned to higher rates, he took exception to
the way in which power generators appeared to be laughing all the way to the bank with California's
money.
``I guess it was inevitable that all of this would be passed on to the consumer,'' Krause said. ``But I think
there should be more investigation of all these power companies that are charging all these exorbitant
rates.''
(San Francisco bureau, 415-677-2541, andrew.quinn@reuters.com)
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