PUC Delays Decision on Power Rate Hike

The state’s utility regulators delayed a decision Monday on how to structure a $5-billion electricity rate increase until today, when they will take up a revised plan that is expected to shift a larger share onto residential customers.

Assailed by power users and pressured by the governor, the California Public Utilities Commission said more time was needed to assess the impact on competing interest groups.

“The problem here is making sure we are allocating [the increase] equitably,” PUC President Loretta Lynch said after the meeting. That, she said, is “tricky.”

About half the residential customers of the state’s two largest utilities would see increases under Lynch’s plan proposed last week. Bills for Southern California Edison customers who use moderate to heavy amounts of power would rise about 9% to 60%. Similar customers of Pacific Gas & Electric Co. would experience increases of about 7% to 40%.

To encourage conservation, Lynch said, she favors moving more of the overall burden of the increases to residential customers who are moderate users of electricity. Other commissioners say they believe that such a shift is necessary to protect the state’s business climate.

Consumer advocates voiced concern that the PUC may be yielding to pressure from industry groups that enjoy relatively low rates but say they are being hit unfairly with much larger percentage increases than residential customers.

“The fear is the commission is caving in and taking [the increase] off big [business] customers and putting it on residential users above 130% of baseline,” said Mike Florio, senior attorney for the Utility Reform Network.

The baseline amount on a bill is the minimum of electricity deemed necessary for a customer and varies by region. Under state legislation, there is no rate increase for consumption up to 130% of baseline. Also exempted are low-income customers who already receive discounted electricity rates.

The commission passed an increase of 3 cents a kilowatt hour March 27. In recent weeks, the panel has been conducting hearings on how to divvy up the increase among 9 million customers of Edison and PG&E.; Monday’s meeting was supposed to climax that process, paving the way for utilities to start billing customers June 1.

Dozens of speakers addressed the commission, and boisterous protesters in white coveralls repeatedly criticized the rate increase, chanting: “I ain’t payin’ no hike, while they’re getting rich from our power rates! Who you gonna call? Rate Busters!” One had to be dragged away from the microphone.

To stunned surprise, Lynch later announced that the commission would not vote on her rate design proposed last week or a similar one proposed by a PUC administrative law judge.

Lynch revised the plan over the weekend and some commissioners said they had not yet seen the changes.

The delay means two commissioners will be out of town when the five-member panel designs the state’s largest rate increase ever. Commissioner Richard Bilas is undergoing a medical procedure in Mendocino County. Commissioner Henry Duque is traveling to Texas as a director of the National Assn. of Utilities Commissioners. They said the law permits them to vote by phone as long as they do it from a publicly accessible place.

Lynch’s proposal called for average rate increases of about 20% to 50% for various classes of customers. But officials said the proposal was being reviewed after testimony late last week and mounting concerns among some commissioners that it would hit industry and big commercial customers too hard, potentially hurting the state’s economy.

After his financial advisors reviewed the PUC’s proposals, Gov. Gray Davis put out a statement over the weekend saying his own proposal, including a slightly smaller rate hike, was better.

“My plan raises sufficient revenues to deal with the problem without putting an undue burden on California consumers and businesses that might hurt our economy,” he said.

The governor’s office last week asked the PUC to “come around,” said press secretary Steve Maviglio. “There are gaps between his proposal and the PUC’s.”

Carl Wood, one of three Davis appointees on the commission, said that he was generally comfortable with the Lynch proposal but that “this is a big decision, and it is not ready” for a vote.

Jeff Brown, another Davis appointee, said he spoke to the governor’s office recently and learned that Davis had two primary concerns about the proposal: “No. 1 that there be sufficient price signals within the residential class [to make people conserve], and that the industrials not be walloped and have some mitigation of the rate increase.”

Brown said he would like to see industrial users paying less than the 50% hike in Lynch’s proposal. He said that would mean residents who consume 300% of their baseline amount would have their rates rise 28% instead of about 15%.

“I want [the proposed amount for industrial customers] to go down somewhat but can’t put all the burden on residentials,” he said. “There are no good answers.”

Duque and Bilas, appointees of former Republican Gov. Pete Wilson, expressed concerns that the rate proposal would further damage the economy.

“Industry is not getting a fair shake,” Bilas said. “If you want to achieve maximum conservation, you put [the increase] where demand is most elastic. It should be placed on you and me.”

Duque said: “I think [industrial users] are getting an undue amount.”

Business groups have argued strongly that consumers must endure their fair share of the pain in order to encourage conservation.

Carl Guardino, president and chief executive of the Silicon Valley Manufacturing Group, said his group phoned Davis’ staff to voice their opposition to the proposed rate structure.

“We found a receptive audience,” he said. “They saw that this [proposed rate structure] will deeply hinder our economy.”

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Reiterman reported from San Francisco, Dickerson from Los Angeles.