Monday, March 26, 2001
California Regulators to Discuss Power-Rate Increase
By David Ward
Sacramento, California, March 26 (Bloomberg) — PG&E Corp. and Edison International, owners of California’s two largest utilities, would get greater-than-expected rate increases under a plan being considered by regulators. Shares of both companies rose by about 30 percent. Sacramento, California, March 26 (Bloomberg) — PG&E Corp. and Edison International, owners of California’s two largest utilities, would get greater-than-expected rate increases under a plan being considered by regulators. Shares of both companies rose by about 30 percent.The plan would boost PG&E’s annual revenue by $2.5 billion and Edison’s by $2.3 billion, the PUC said. Rates may rise by as much as 36 percent for PG&E customers and 27 percent for Edison customers, state Public Utilities Commission President Loretta Lynch said. The PUC will discuss the plan tomorrow. Customers using less power would see smaller increases, she said. The utilities have said they need rate increases to offset higher wholesale-power costs, which have mired them in $13 billion of debt and pushed them near insolvency. The plan marks a turnaround for state officials, who had resisted higher consumer rates as they seek solutions to the state’s power crisis. “The source of the problem is the cost of energy,” Lynch said at a press conference in San Francisco. “Frankly, who knows how much we’re going to need to cover our energy costs in 2001?”PG&E shares rose $3.10, or 29 percent, to $13.75, after rising as high as $14.70. Edison rose $3.35, or 30 percent, to $14.55. Earlier, Edison shares rose as high as $15.02.Rates Already Higher
The proposed increases would be on top of a 10 percent increase earlier this year and a 10 percent increase expected next year. The PUC will likely debate the issue tomorrow, then seek public comment before a decision is made, Lynch and State Finance Director Timothy Gage said.
The state is facing electricity shortages in part due to a 1996 deregulation law that allowed wholesale electricity prices to fluctuate while consumer rates were frozen. Pacific Gas & Electric and Southern California Edison were driven to the verge of bankruptcy after purchasing power at soaring wholesale prices. California was forced to step in and buy power for its utilities and has already spent almost $4 billion. The state plans to issue $10 billion in bonds to cover future power costs repaid by utility rates.
Aides to California Governor Gray Davis continue to negotiate with the utilities on a financial rescue plan that will give them billions to pay back more than $13 billion in debts run up buying electricity at higher prices than they could charge customers because of the state’s flawed 1996 deregulation plan.
Talks ‘Not Encouraging’
Talks with PG&E are “not encouraging” and the state Senate is consulting with bankruptcy lawyers on what to do if the utility or its creditors file bankruptcy, Senate Utilities Committee Chairman Debra Bowen said.
“Bankruptcy continues to be something that is not a solution and is something we continue to avoid, given the devastating impact it would have on California,” said Pacific Gas & Electric spokesman John Nelson.
An agreement with Edison is close, said Joseph Fichera, chief executive of New York investment adviser Saber Partners LLC. Fichera is leading Davis’s talk with the utilities. He said the state has made a detailed offer to PG&E and that it has responded with a list of questions.
The PUC likely will approve an order tomorrow setting aside a portion of consumer rates to pay back the state. State Treasurer Phil Angelides has said that approval is necessary for the state to issue the bonds.
Pacific Gas & Electric and Sempra Energy had no immediate comment on the rate-increase proposal, spokesmen at the companies said.