Restructuring Utility Rates

The column by Peter Navarro (Commentary, Sept. 15) on the restructuring of California’s electric utility industry was reckless in its distortion of the facts.

The move to a more fully competitive marketplace in California promises greater choice for customers, and inevitably, lower costs. The California Public Utilities Commission (CPUC), the governor’s office and the Legislature deserve credit for their roles in encouraging a model of building consensus between organizations with competing interests in the process.

Critical to the success of restructuring is the need to uphold past regulatory commitments. Under the regulatory compact, shareholders in investor-owned utilities were granted an opportunity to earn a return on those investments deemed prudent and reasonable by the CPUC.

We do not seek, nor do we expect, our shareholders to be compensated for investments that the CPUC has not approved as reasonable and prudent. Indeed, our shareholders have been denied hundreds of millions of dollars in recovery by past CPUC decisions. However, to renege on these commitments once they have already been approved would be a breach of faith for California’s investment climate.

Navarro is wrong in his description of the effect of restructuring on residential and small business customers. The proposals being considered by the CPUC protect small customers from cost-shifting. The costs for California’s public policy programs and the competitive transition charge would be borne by all classes of ratepayers, and all classes of ratepayers would have access to competitively priced electricity.

Navarro appears to be similarly misinformed about the market structure being considered by the CPUC. All of the proposals call for an independent system operator to control the scheduling of all electricity on the state’s power grid.

Finally, Navarro is wrong about the experience of the United Kingdom after utility restructuring. Rates went down for residential and small commercial users. Only those customers whose rates had previously been subsidized by other customers did not experience rate reductions.

STEPHEN E. FRANK, President

Southern California Edison Co.

Rosemead