California hopes rate increase will spur conservation

SAN FRANCISCO, California (CNN) -- California regulators plan to raise rates sharply for the state's biggest power consumers to spur conservation.

Under a plan the state Public Utilities Commission takes up Tuesday, residential customers who conserve would see no new increases; those who do not would pay more than 40 percent more.

The plan would raise rates up to 3 cents per kilowatt-hour. It faces opposition from ratepayers already upset by spiraling energy costs and rolling blackouts blamed on California's attempt to deregulate its electric utilities.

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

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.

The state's two largest investor-owned utilities, Pacific Gas and Electric and Southern California 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 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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Foundation For Taxpayer & Consumer Rights

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