Utilities Seek Lower Cap on Electric Prices

PG&E; Corp. and Edison International, owners of California’s two largest electric utilities, asked federal regulators for a lower cap on the price they pay for power in the state.

The companies filed a petition to the Federal Energy Regulatory Commission, seeking a cap of $100 per megawatt-hour on the price of wholesale power. They also asked the commission to find that California’s electricity market isn’t competitive and that prices have been unjust and unreasonable.

The current cap on wholesale prices through the California Independent System Operator, which manages 75% of the state’s power grid, is $250 a megawatt. Prices repeatedly reached that cap in hours of peak demand during the hottest days this year.

PG&E;’s Pacific Gas and Electric and Edison’s Southern California Edison were joined in the filing, which had been expected, by the Utility Reform Network, a consumer group, PG&E; spokesman John Nelson said.

The utilities said in the filing that they each face about $2 billion in losses because electricity rates they can charge customers are frozen far below the rates they had to pay for wholesale power during the year’s hottest months.

The utilities can’t raise rates until March 31, 2002, or until they finish selling power plants and recover costs incurred building them through fees charged to consumers.

“The stakes for PG&E; and Edison are extremely high,” the companies said in the filing.

“If something is not done quickly to address the situation in California, their ability to continue to provide utility service to their retail customers and to honor their financial obligations may be jeopardized.”

The filing by San Francisco-based PG&E; and Rosemead, Calif.-based Edison seeks to expand the cap from the California ISO to the California Power Exchange, which operates the state’s day-ahead market.

The request applies to the California Power Exchange’s and the ISO’s day-ahead, hour-ahead, day-of and real-time markets.

PG&E; said the average prices it was charged for power were about 16.3 cents a kilowatt-hour in June, 11 cents in July and 18.7 cents in August. In the same months last year, it was charged 3 cents, 3.9 cents and 4.1 cents, the company said in the filing.

Under California’s rate freeze, PG&E; was allowed to charge its customers only 5.4 cents a kilowatt-hour.

“In short, compared to the summer of 1999, PG&E;’s and Edison’s wholesale electric energy costs quadrupled during the summer of 2000, but the rates available to pay those costs were frozen,” the companies said.

The companies said in the filing that they don’t expect the $100-a-megawatt-hour cap to be permanent. Rather, they want the cap to remain in effect until the Federal Energy Regulatory Commission institutes improvements to California’s power markets, which they described as “broken.”

PG&E;’s shares rose 31 cents to $28.38. Edison shares fell 81 cents to $21.19. The filing was announced after the close of regular U.S. trading.