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Electric bills likely to rise in California by Gail Kinsey Hill, Oregonian staff The Oregonian, December 22, 2000

Utility regulators say consumers should pay more to help
the state's largest electric companies avoid possible bankruptcy

SAN FRANCISCO -- In the strongest sign yet that electric bills will soon rise sharply for millions of Californians, state utility regulators said Thursday that customers should pay more to keep the state's largest electric companies from going bankrupt.

"We believe that retail rates in California must begin to rise. It's our intent to maintain the utilities' access to capital on reasonable terms," the Public Utilities Commission said in a recovery plan that includes an independent audit of the utilities' books.

The commission said it will resolve the question of just how much customers will pay Jan. 4. In ongoing negotiations with Gov. Gray Davis and other politicians and regulators, the utilities have asked that customers pay for 20 percent or more of the companies' debt.

Before making any such deal, the commission wants to know just how bad the financial picture is for Pacific Gas and Electric and Southern California Edison. Both utilities have taken on more than $8 billion in debt buying energy on the open market, but a rate freeze prevents them from passing the costs to consumers.

"We have a public trust to keep the lights on," Chairwoman Loretta Lynch said before the commission unanimously approved the plan. "We need to obtain the facts, and we have a legal duty to make sure the facts are accurate."

The utilities' credit problems don't sit well with power providers who are selling to California under a federal order issued by U.S. Energy Secretary Bill Richardson on Dec. 14. The order is effective until at least Wednesday.

The order dictates that 75 generators and marketers, many in the Pacific Northwest, must sell electricity to California if they have excess power. The California Independent System Organization, which operates the state's electrical grid, is authorized from the federal government to issue the demands if domestic supplies are inadequate.

Portland General Electric was among those to receive orders to sell power Wednesday and Thursday and complied, said Walt Pollock, senior vice president of power supply.

Fearing a cold December, PGE bought extra power for December, paying as much as $1,200 a megawatt hour. Now, it's selling some of that high-priced electricity to California, and officials are becoming increasingly worried about whether they'll ever pay.

"It would be extremely unfair if we didn't get paid," Pollock said. "As a legal matter, if we're doing something we're ordered to do by the United States of America, probably there should be assurances that we'll be paid."

Portland-based PacifiCorp and Bonneville Power Administration also were among the 75 power providers subject to the order. PacifiCorp officials were not available to comment.

Bonneville Power Administration, a federal agency that markets the power from 29 federal dams on the Columbia-Snake River Basin, began selling power to California when the order came down earlier this month. In BPA's case, money isn't an issue. Under an exchange agreement, the agency receives 2 megawatts of power for each megawatt it sends south. California returns the power when it becomes available.

"We've managed to come up with a method of helping us both out," said Ed Mosey, a BPA spokesman.

The California Public Utilities Commission will hold emergency public hearings Wednesday and Thursday on the utilities' finances, allowing consumer advocates to have their say. But the language of the draft proposal left little doubt about where the commission stands on rate increases.

The political stakes couldn't be higher for Davis, who has enjoyed high-approval ratings but has been increasingly accused of failing to take action to avert the energy crisis, which has led to almost daily threats of rolling blackouts and concerns that the state's economy could suffer.

Davis must balance consumer outrage over higher electric bills against the utilities' need to stay solvent.

"He's walking a tightrope," said spokesman Steve Maviglio.

Davis has little power over the energy market -- only the Federal Energy Regulatory Commission can set price controls or force energy wholesalers to lock in prices with long-term contracts, two solutions advocated by Richardson.

But the governor, who has strong influence on the commission, can sign legislation to re-regulate California's energy market and use state money to help consumers or bail out the utilities. And even if the companies do go bankrupt, he could order them to continue providing electricity, with the state stepping in to guarantee their credit.

For all these reasons, consumer advocates say the crisis has been manufactured and denigrated Standard & Poor's warning Wednesday that the utilities could lose their credit worthiness and no longer afford to buy power.

"Wall Street seems to think that every time a big company gets into trouble, there has to be a bailout by the customers or taxpayers," said Harvey Rosenfield, executive director of the Foundation for Taxpayer and Consumer Rights, a watchdog group based in Santa Monica, Calif.