California regulators OK electric rate hike

SAN FRANCISCO, California (CNN) -- Hoping to ease the state's chronic power shortages, California regulators Tuesday approved electricity rate increases topping 40 percent.

The state Public Utilities Commission voted unanimously to raise rates by 3 cents a kilowatt-hour, but customers who conserve electricity could avoid higher bills.

The rate hikes apply to millions of customers of Southern California Edison and Pacific Gas and Electric, the state's two largest utilities. Low-income residents would be exempt from the increases.

IN-DEPTH SPECIAL Online coverage of the energy crunch in California   MESSAGE BOARD Power crisis

The plan faced opposition from ratepayers already upset by spiraling energy costs and rolling blackouts blamed on California's attempt to deregulate its electric utilities. Some demonstrators attended the meeting with signs declaring, "We won't pay."

The commission already has imposed rate increases between 9 percent and 15 percent this year and has a 10 percent increase set to take effect next year. Details of who will pay and how much will be worked out in the next 30 days.

PG&E and SoCal Edison have been reeling from high wholesale power costs while California's deregulation law limited rate increases. The state has been spending more than $40 million a day to keep power flowing after wholesalers cut off credit to PG&E and SoCal Edison.

Consumer advocates argue that the commission, Gov. Gray Davis and the Federal Energy Regulatory Commission are not doing enough to bring down exorbitant rates charged by out-of-state power generators.

"The generators should be forced to take lower prices," Michel Florio, a senior attorney for The Utility Reform Network, told The Associated Press. Florio said the state should use its powers of eminent domain to seize the power plants and run them itself.

Loretta Lynch, president of the California Public Utilities Commission, cited the Federal Energy Regulation Commission's "failure to act" on energy rates as a major factor in California's continuing crisis.

On top of rate hikes and payment orders, California regulators say they will investigate utility holding companies to assess any responsibility they might bear for the energy crisis.

Commission audits confirmed that California utilities were indeed distressed and sorely in need of money, but harsh criticism has been leveled at these holding companies for moving money out of the utilities to the parent companies. The companies maintain that their actions are legal and were undertaken solely to protect shareholders.

And last week, California's Independent System Operator -- which runs most of the state's power grid -- reported that electricity wholesalers overcharged state utilities by $5.5 billion over the past 10 months.

"All overcharged, but some excessively and some by moderate amounts," Anjali Sheffrin, the ISO's director of market analysis, told the Los Angeles Times. The companies denied the allegations, adding they expect the Federal Energy Regulatory Commission will determine their prices were justified.

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PG&E Corporation
SoCal Edison
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California Power Exchange
System Conditions - The California ISO
California Public Utilities Commission
California Utilities Emergency Association
Foundation For Taxpayer & Consumer Rights

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