Edison Gets OK to Cut Rate for Mobil Refinery : Energy: Utility says customers would have to pay more if big industrial users left to procure power elsewhere.

In what could be a glimpse into a new world of deregulated electricity, the state Public Utilities Commission on Wednesday approved a 25% cut in electric rates for Mobil Corp.’s Torrance refinery, allowing Southern California Edison to retain its biggest customer.

Though the impact of the Mobil deal--or any single industrial discount--on residential rates will be slight, advocates for residential users said the PUC should be making utility stockholders swallow the costs of such arrangements.

But they also say the consequences of big industrial users dropping out of utility systems could be far graver.

As part of a remodeling and expansion, Mobil had planned to make its own electric power at a cogeneration plant that also would have produced the steam needed for refinery operations. Edison countered by proposing a discount rate for $700 million worth of power, and Mobil agreed.

“What we’ve done is keep our largest industrial customer in the system,” said Bob Bridenbecker, Edison vice president of customer solutions. “This is the best of all possible circumstances for ratepayers.”

As new federal and state rules allow big industrial customers more options for buying their electricity, Edison and other utilities say they must compete by lowering rates--or else raise everyone’s rates dramatically to pay their fixed costs when big users go elsewhere for electricity.

Though other customers will face a rate increase to make up for Mobil’s discount, Edison and the PUC say that without Mobil, other ratepayers would have to bear $100 million to $180 million in fixed operating costs over the 15-year life of the contract.

“Some costs that were being loaded onto Mobil’s tariff rates will now have to be picked up by Edison’s other customers, but it’s a lot less than if Mobil had left Edison’s system,” said James Boothe, chief of staff in the PUC president’s office.

Industrial customers already pay generally lower rates than residential or smaller commercial customers, in part because it costs less to supply them. While an industrial customer may be able to take bulk electricity at 66,000 volts, residential and commercial customers require current reductions, as well as all the associated transformers and power lines that distribute electricity house-to-house.

Edison charges residential users 12 cents a kilowatt hour; industrial users pay an average of 7 cents a kilowatt hour, with some industrial customers paying as little as 4 cents. Mobil’s rate will drop from 6.8 cents to 5.1 cents.

“This particular deal is going to have an almost infinitesimal effect on ratepayer rates,” said Robert Finkelstein, staff attorney at Toward Utility Rate Normalization, a San Francisco-based consumer advocacy group. “But on the larger scale, we think that if (utilities) are going to be giving these discounts, they ought to pay for them with shareholder money.”

The greatest benefit of keeping big industrial users in a utility’s system goes to the utility, not ratepayers, Finkelstein said, and so shareholders should make up the difference in fixed costs.

Indeed, since the late 1980s, when Atlantic Richfield Co. and other big industrial customers set up their own power plants, Edison has been fighting to keep customers on the system, Bridenbecker said, while the state’s weak economy has reduced its business base.