California's top energy regulator will propose raising electricity rates Tuesday. Large energy users and residential customers will be hit with the largest increases starting in May, Loretta Lynch, president of the California Public Utilities Commission, told the Los Angeles Times. But "there is no inflation." <ggg>. Anticipating the action, Southern California Edison said Sunday that it will resume payments to qualifying facility generators on a going-forward basis - this was good news for DYN and explains the reason the shares were up roughly 6% yesterday. PG&E said it may take a $4 billion charge for high power costs:
"Calif. faces power rate hikes
Tuesday, March 27, 2001 07:41 AM EST
SAN FRANCISCO, Mar 26, 2001 (United Press International via COMTEX) --
California regulators said Monday they were prepared to bite the bullet and
allow consumer electric bills to jump by nearly half this summer in order to
help pay higher wholesale power costs and protect the financial integrity of the
state treasury and struggling utility companies.
The tiered structure of the rate hikes, which will be formally proposed by the
California Public Utilities Commission on Tuesday, has not yet been established,
however PUC Chairwoman Loretta Lynch said Monday the increases would be aimed at
heavy power users as a means of encouraging conservation.
"Electricity hogs will need to pay more for the electricity they use,
particularly this summer," Lynch told a San Francisco news conference.
The proposed rate hikes could be reflected in customer electric bills as early
as 30-45 days from their approval, Lynch said.
The PUC plan may mark the end of the state's efforts to navigate the current
bull market for electricity and natural gas without a serious spike in retail
rates.
Gov. Gray Davis told television reporters in Los Angeles Monday that he remained
opposed to rate hikes, however Lynch said that the State Legislature's efforts
to solve the crisis had stalled and the federal government was not addressing
the sharp increase in wholesale prices that forced the state to pay $20 billion
more for electricity in 2000 than was paid in 1999.
The PUC proposal would add another 3 cents per kilowatt hour (KwH) to the
current average retail price of 7-8 cents KwH.
A temporary 90-day surcharge of 1 cent KwH was approved by the PUC in January,
however utility executives called it completely inadequate. The increase
translated to power bills 9-15 percent higher. Utility companies had sought
25-30 percent increases.
"We recognize that in order for the utilities to keep the lights on ... we have
unfortunately come to the conclusion that a rate increase is needed," Lynch
said.
The additional revenue will allow the state's utilities to finance future power
purchases and possibly chip away at the staggering unpaid bill for previous
power purchases that have pushed Southern California Edison and Pacific Gas and
Electric toward bankruptcy.
The state has been acting as a purchaser of electricity on behalf of Edison,
PG&E and San Diego Gas & Electric since January through the Department of Water
Resources, and boosting the revenue stream will help the state back bonds that
will be issued to finance the power purchases.
The PUC plan requires the utilities to make payments to the DWR and to so-called
qualifying facilities (QFs), small renewable energy or gas cogeneration plants
that have been halting power production due to a lack of payment from the
utilities.
Some QFs have said they were forced to shut down because the lack of payments
means they are no longer able to buy natural gas to fuel their generators.
"We cannot direct those gas suppliers to sell to the QFs, but I have confidence
that we will see a significant rise in generation by the QFs," said Commissioner
Carl Wood. "The QFs make their money by generating electricity, so it is in
their interest to procure those gas supplies."
The distribution of the higher rates will be determined in the near future after
the DWR provides the PUC with additional financial data, Lynch said. The rate
hikes will, however, be tilted toward commercial and residential customers that
use higher amounts of power. Many customers who use only average levels of power
will likely not see any increase.
"The rate increase depends on how much (electricity) you use," she said.
(Reported by Hil Anderson in Los Angeles)
Copyright 2001 by United Press International.
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