PG&E;’s Power Bill May Go Up

California regulators plan to shift roughly $250 million a year of the cost of buying power for the state away from financially troubled Southern California Edison to Pacific Gas & Electric, which already is in bankruptcy.

The move, part of a draft decision issued Monday by Loretta M. Lynch, president of the state Public Utilities Commission, is a step toward completing plans for repaying the state treasury for money spent buying electricity on behalf of the state’s three major private utilities--Edison, PG&E; and San Diego Gas & Electric.

The PUC also issued a draft decision that would increase the electricity rates of San Diego customers by an average of 12%.

Another draft decision would suspend the ability of electricity customers statewide to choose their own power provider. That decision was a blow to electricity-generating firms, such as Enron and AES NewEnergy, which had lobbied hard to maintain the ability to sell directly to customers--mostly large businesses--that have chosen not to buy power from the local utility.

The five-member commission will vote on the measures Sept. 6.

The proposals are designed to assure a flow of revenue to the state Department of Water Resources, which has been buying power for utility customers most of this year. The state’s power crisis saddled the utilities with so much debt that earlier this year they became financially unable to buy power on behalf of their customers.

The Department of Water Resources has been paying for power out of the state treasury. To reimburse the treasury, the state plans to float a $12.5-billion bond issue. Those bonds would be paid off by customers of the three utilities.

One of the issues before the PUC has been how much of the cost of those bonds should be carried by each of the three utility companies.

The Department of Water Resources had proposed charging each utility the same amount per customer. But the PUC’s proposed order calls for splitting the cost among the utilities according to how much it costs the department to provide power to each of them. “The utilities argued that it was discriminatory to have their customers subsidizing other customers’ costs,” Lynch told a news conference. “And we agreed.”

“Instead of giving all utilities the same allocation of cost equally,” she said, “we instead dig down behind the numbers to determine how much it actually costs” to serve each of the utility’s customers.

The PUC’s analysis determined that the cost of serving Edison is lower than the cost of serving PG&E.; The resulting decision shifts $500 million in payments from Edison to PG&E; over the next two years.

Edison customers, however, will not see a drop in their electricity bills. Whatever money is left over after the Department of Water Resources takes its share can be used by Edison to cover the costs of its own power production and purchases. The PUC is now holding hearings to determine just how much of what is left over should go to Edison.

Whether the rates paid by PG&E; customers would actually go up under the PUC proposal remains unclear. But PG&E; officials condemned the shift as unfair.

“If adopted by the [PUC] this would lock our customers into 40% to 55% higher rates for DWR power over the next 10 years, compared to customers of Southern California Edison and SDG&E;,” the company said in a statement. “This massive cost shift was not proposed by DWR, discriminates against PG&E;’s customers, and has not been subject to public review, due process, or cost justification by DWR or the [PUC].”

The PUC’s actions are intended to convince Wall Street that the state will be able to repay the bond issue. In general, the draft orders issued Monday mirror an earlier proposed agreement that essentially insulates the Department of Water Resources from PUC reviews of electricity rate increases. But the decision by the PUC to alter the way the department’s power-buying costs are allocated among the major utilities was a significant change.

Steve Maviglio, Gov. Gray Davis’ press secretary, said the fact that the PUC was putting in place the legal machinery necessary for the bond sale is “a positive step in moving the ball forward.”

Maviglio denied that PG&E; was being punished for choosing bankruptcy earlier this year rather than cooperate with the Davis administration on a possible rescue plan. “It’s all based on numbers and math; politics is not in the equation,” he said.

Spokesmen for Edison and SDG&E; said they needed to study the draft decisions before commenting. The PUC will require the Department of Water Resources to give it an updated revenue requirement in February, spelling out the agency’s actual expenditure for the last year. That information will be used by the PUC to decide whether to adjust the electricity rates of utility customers up or down. Any changes would show up in customers’ bills next June, Lynch said.

If approved by the full PUC, the proposed agreement would mean that the Department of Water Resources, which has entered into $43 billion in long-term contracts for power, will not be subject to PUC reviews. Lynch said state legislation gives the department the responsibility to review its own costs.

That lack of independent review worried consumer advocate Lenny Goldberg, a lobbyist for the Utility Reform Network. “Just accepting DWR at whole cloth is an abdication of how ratepayers ought to be treated,” he said.

Goldberg said he hopes the Legislature passes a bill by Sen. John Burton (D-San Francisco) that would give the PUC authority to scrutinize the water agency’s costs.

But Davis’ advisors say such scrutiny could frighten Wall Street investors and hurt the state’s ability to sell bonds at a favorable price. The proposed PUC order raising electricity rates for many of SDG&E;’s 1.2 million customers would become effective no later than Oct. 1. Rates for PG&E; and Edison customers were increased earlier this year. The average rate hike for SDG&E; customers amounts to 1.4 cents per kilowatt-hour--less than half of the rate hike approved for utility customers elsewhere.

Lynch said the proposed increase for SDG&E; is lower because its customers bore the full cost of electricity in California’s haywire electricity market last summer. While Edison and PG&E; customers were protected by a rate freeze, SDG&E; customers saw their bills double and in some cases triple before the Legislature stepped in to cap rates last September.

To encourage conservation, the San Diego rate hike is structured so that residential customers who use no more than 130% of a baseline amount would not experience any increase. Baseline is the number of kilowatt-hours that supposedly meets the minimum needs of an average household in a particular region. The average increases would be 18% for small commercial customers and 19% for industrial firms.

The move to suspend the right of consumers to buy power directly from generators would put an end to one of the major selling points for the state’s failed 1998 deregulation plan. Supporters of direct access, as the consumer-choice provision is known, were especially dismayed that the PUC said it would suspend choice retroactive to July 1. Some companies, including AES NewEnergy, had pushed in recent weeks to sign up new customers before the option was eliminated. Those contracts would appear to be invalid if the PUC adopts the draft decision.

Enron spokeswoman Karen Denne said the suspension of the so-called direct access program “is incredible bad news for business.”

“It appears the only way to escape the California energy debacle is to escape California,” she said.

State officials have said they could not allow direct access in order to ensure that all customers pay their share of the cost of reimbursing the state for its power purchases.

*

Times Staff Writer Nancy Rivera Brooks contributed to this story.