Edison Gets OK for 11% Rate Raise

Despite weak energy prices worldwide, Southern California Edison won permission Wednesday to boost its electricity rates to residential customers by an average of 11%, or nearly $5 a month.

Regulators blamed most of the increase on the shortage of natural gas locally--a side effect of the drought and other problems--and on Edison’s high-cost contracts to buy power from independent producers, including its own subsidiaries.

The action by the California Public Utilities Commission completes a two-step increase that will raise rates overall by about 8.5%, or $465 million. Residential rates will climb 11% to $49.85 per month for the typical user, up from $44.92 as recently as last spring.

Edison’s customers are already paying part of the higher rates, because the PUC granted $200 million of the increase on an interim basis as of June 1. The second phase takes effect Oct. 1.

The higher rates are based on what Edison is expected to pay for the power it uses to make electricity and for the power it will purchase over the year ending next June 30. Edison uses natural gas, oil, nuclear, hydroelectric and coal, and buys electricity from various independent power producers.

Recent shortages of natural gas have driven prices up sharply, while the drought has dried up sources of hydroelectric power and forced utilities to make more electricity with natural gas.

PUC officials said Edison paid $88 million more for fuel in July than it took in from ratepayers.

Gas Storage Supplies Low

Southern California Gas was recently forced to limit deliveries of natural gas to electric utilities because its storage levels were running low. The rate increases approved Wednesday assume another 15 days of curtailment of natural gas shipments to Edison before next summer.

However, PUC and Edison officials said the biggest single reason for the large rate hike is the long-term contracts it was required by law to sign in the early 1980s to buy power from cogeneration firms and other independent power companies that use alternative energy.

Edison complains that many of those contracts are based on high fixed prices that exceed today’s market prices, driving up its own costs artificially. The contracts were the result of state and federal initiatives to create an alternative energy industry.

Among the largest such independent producers are the subsidiaries of utilities, such as Edison’s Mission Energy, which are not subject to regulation by the PUC.

Janice G. Hamrin, executive director of Independent Power Producers, a trade group, said Mission Energy is a partner in 60% of the independent power projects for which Edison blames the current rate increases.

“It’s like Pogo,” Hamrin said of Edison. “They’ve seen the enemy, and it is them.”

The proportionately higher share of the rate increase being shouldered by residential customers is part of a PUC policy to eliminate the partial subsidization of residential rates by industrial users, who in recent years have paid more than their share of the cost of delivering electricity.