San Gabriel Valley : Utility Says Survival Hinges on Higher Rates, Paying Off Debt

As California prepares to deregulate its electric industry in 1998, Pasadena’s Water and Power Department must increase customers’ rates by a fifth, end a $13-million annual transfer to the city and make other savings to pay down its massive debt during the next eight years to survive, the utility’s general manager warned a shocked City Council on Monday.

General Manager Rufus Hightower outlined a plan that calls for customers of the city-owned utility to pay more but still less than Southern Californian Edison charges. The proposal would eliminate the transfer to the city general fund that provides 10% of the city’s annual budget, forcing the council to cut services and lay off 150 employees.

As the deregulation will allow large customers to buy from any provider they want, Hightower said, the city utility must reduce its costs and eliminate $399 million in debt to be competitive in the long run.

He said these costs include investments in an Arizona nuclear power plant and a Utah coal-powered station. These investment contracts require the city to pay for the power generated by these plants for an additional two decades regardless of whether it is used, Hightower said.

“It’s hard to sell this as anything beyond a bad scene,” said Vice Mayor Chris Holden, who will vote with his colleagues on the issue later this year.

Horrified council members suggested the city seek to get out of the contracts with Utah’s Intermountain Coal and the Palo Verde nuclear plant or consider selling the city-owned utility. But Hightower replied that the contracts were airtight and that the utility had no value given its high debt.