2nd Rate Cut Not Law

Many politicians and utility executives who ballyhooed the passage of the state’s energy deregulation bill touted not only the 10% electricity rate cut and freeze for residential customers and small businesses mandated for four years starting in January 1998, but also teased the electorate with a further 10% reduction in 2002.

Well, that second rate cut is not written into the law. And Wall Street types, such as Dan Aschenbach of Moody’s Investors Services, who have taken a close look at the $10-billion bond sale scheme to finance the rate cut, doubt it ever will come about. Payments on the bonds will cancel out energy savings resulting from a free market, Aschenbach said.

“The bonds will have to be paid over a 10-year period [starting in 1998], and for investor-owned utilities to pay off that debt, they will have to keep the bills near where they are now,” Aschenbach said.

Dan G. Ozenne, senior manager and utilities practice leader at Arthur Andersen in Los Angeles, described the mandated 10% rate cut as “a false economy, like saying you can save on your mortgage by extending the time period. It’s not true savings.”