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		 Subject: Utilities, Electric: Deregulation: California Electric Utility 
Seeks to Recoup Costs from ...


 
California Electric Utility Seeks to Recoup Costs from Customers 
Rick Burnham 
? 
09/27/2000 
KRTBN Knight-Ridder Tribune Business News: The Press-Enterprise - Riverside, 
California 
Copyright (C) 2000 KRTBN Knight Ridder Tribune Business News; Source: World 
Reporter (TM) 

Southern California Edison is asking state regulators for permission to 
charge customers for its soaring wholesale electricity costs -- a bill of 
nearly $2 billion and growing.

Under the 1996 legislation that deregulated the state's electricity industry, 
rates are frozen for the residential and small business customers of Southern 
California Edison and Pacific Gas&Electric until March 31, 2002 or until the 
utilities pay off their "stranded assets," investments made in nuclear power 
plants and other obligations. 

That has left the utilities to pay the difference between the frozen rate and 
this summer's skyrocketing market rates.

As of Aug. 31, the difference -- known as an undercollection -- amounts to 
$1.97 billion for Edison, the company said Tuesday.

Not all details have been worked out, but Edison will file a request later 
this week with the state Public Utilities Commission asking for permission to 
recoup their unpaid electricity costs after the rate freeze ends, said Jim 
Scalacci, its chief financial officer.

Edison officials couldn't say how much the extra cost would add to the 
typical Edison residential customer's bill. But if the current $1.97 billion 
in undercollections were sought all at once as a rate increase, it would 
raise rates more than 20 percent, Scilacci said.

"Of course we would not propose that," Scilacci said. "We would span it over 
a period of time."

Instead, the utility will make another filing to regulators later this year 
for a "rate stabilization plan" that would include a rate increase and a 
mechanism to recover its undercollections over a period of time, Scalacci 
said.

The utility said it also would consider other options -- including a lawsuit 
-- to recoup the costs.

Sempra Energy, parent of San Diego Gas&Electric, paid off its stranded assets 
more than a year ago, allowing it to pass through the full cost of 
electricity to its customers.

That resulted in SDGOaverage monthly residential bills skyrocketing from $40 
to $68 to $130 in less than three months this summer. After an outcry from 
SDGOcustomers, area politicians and consumer groups, the state legislature in 
August capped SDGOresidential rates to a maximum of $68 a month.

The deregulated electricity market does not affect customers of municipal 
utilities, such as those in the cities of Riverside, Colton, Banning and Los 
Angeles.

Under the deregulation law, the investor-owned utilities are able to recover 
undercollections from future positive revenues until they recover all 
stranded costs or the March 31, 2002 deadline.

Edison believes it already has amassed enough credits through the pending 
sale of power plants and the valuation of its hydroelectric properties to 
offset its $1.3 billion in stranded assets.

But so far, the PUC has denied requests from the utilities to regain their 
uncovered costs after the rate freeze ends. Regulators also have prohibited 
the utilities from continuing to collect the charge to offset stranded costs.

Pacific Gas&Electric appealed the PUC's denial, but the Califoria Court of 
Appeal denied its petition for review. The case is being appealed to the 
state Supreme Court.

Edison believes the PUC -- in refusing to allow the utilities to recoup 
undercollections past the 2002 deadline -- is misinterpreting California's 
electricity restructuring law.

"That law placed California electric utility companies at risk for recovery 
of their stranded costs, but did not place them at risk for recovery of the 
costs of procuring electricity for customers," Edison said in a filing with 
the Securities and Exchange Commission.

PUC President Loretta Lynch said she recognized that the utilities are 
hurting. But Lynch said the ultimate answer isn't to expect consumers to foot 
the entire bill.

The action by the utilities also appears to presume that California's 
electricity woes will continue, leaving them no way to recoup their costs in 
the future, Lynch said.

"The presumption that the market will stay out of whack the next two years is 
incorrect," Lynch said. "I would hope the federal government will do 
something (about addressing the wholesale electricity market)," she said.

Lynch said regulators will take a look at the total utility picture -- 
including the revenue utilities continue to make from generating power. 
"We'll be asking for the revenue side as well as the expense side," she said.

PUC commissioner Carl Wood, a former Riverside resident, said Tuesday that he 
thinks it's unreasonable to assume that just because Edison is making the 
request that it will be approved.

Wood said this summer's higher electricity rates have been caused at least in 
part by a dysfunctional market and what he calls "unconscionable pricing."

"Edison ought to focus on getting money back from the generators and 
suppliers ...," Wood said.

Meanwhile, consumer advocates in San Diego and San Francisco requested that 
candidates for state or federal office sign a Ratepayer Protection Pledge to 
protect consumers from "unfair and unreasonable electric rates."

The pledge, developed by TURN (The Utility Reform Network), The Foundation 
for Taxpayer and Consumer Rights and Consumers Union, was mailed to all 
candidates Tuesday.

"Utility-style deregulation has obviously failed, and lawmakers must act now 
to prevent the entire state from being thrown into a financial crisis," said 
Nettie Hoge, executive director of San Francisco-based TURN.

The consumer groups said that if politicians sign the pledge, they commit to 
oppose any legislation or efforts to force ratepayers to pay Edison, PGOor 
SDGOretrospectively for this summer's high wholesale energy costs. They also 
would agree to "not allow for rate increases for PGOor Edison ratepayers 
during the rate freeze period and beyond until such time as rates are just 
and reasonable."

TURN and FTCR said they will post a list of all candidates and their position 
on the pledge on their Web sites (www.turn.org) and 
(www.consumerwatchdog.org). 

Folder Name: Utilities, Electric: Deregulation 
Relevance Score on Scale of 100: 98

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