California OKs Record Rate-Hike Plan

SAN FRANCISCO – State power regulators finally decided Tuesday how to spread the pain of the biggest electric rate hikes in California history, boosting rates by as much as 80 percent for residential customers who use the most power.

More than half of the residential ratepayers served by the state's two largest utilities will see no increase at all in their rates. But for those who consume the most, the new rates translate into an average increase of $85 per month for electricity.

The plan, approved 3-2 by the state Public Utilities Commission, affects about 9 million customers of the state's two largest utilities, Pacific Gas and Electric Co. and Southern California Edison Co.

The new rates, which will appear on June bills, were approved seven weeks after the PUC mandated a $5 billion rate hike. The plan's passage came after a week of intense lobbying by industrial, commercial, agricultural and residential groups -- all trying to influence how the PUC would allocate the rate hikes.

Even after the vote, there was confusion within the PUC over the new rates. The PUC released three sets of figures throughout the day, each with dramatically different rate hikes.

The 80 percent figure for the biggest electricity users came from a chart released after the vote by PUC energy division director Paul Clanon.

The average rate increase for all residential customers of the two utilities is 19 percent. But low-income ratepayers and those who use the least electricity will face no rate hike at all.

The biggest losers are the biggest users.

Residential ratepayers are divided into five tiers, and those in PG&E's top tier -- about 9 percent of that utility's residential customers -- will see electric rates jump from 14.3 cents to 25.8 cents per kilowatt hour. That's an 80 percent increase.

That translates into an average increase of $85 -- from $232 to $317 -- on monthly bills.

For Edison's heaviest residential users, the rate hike is 71 percent -- or an average increase from $194 to $265 on monthly bills.

However, not all of a top-tiered customer's electricity is subject to that colossal jump in rates. Under state law, a substantial chunk of every residential ratepayer's power use is protected from rate hikes. Tuesday's tiered rate increases apply only to energy used above that protected amount.

"The rate in that category could be going up that much, 80 percent, but there's still a good portion of their usage that would be billed under the lower block," said Akbar Jazayeri, director of revenue and tariffs at Edison.

Industrial customers of PG&E and Edison face rate hikes of about 50 percent, while commercial and agricultural ratepayers will see less significant increases.

The rate hikes, which will begin appearing on June bills, will be retroactive to March 27 -- the day the record rate hikes were approved -- though those retroactive charges will be spread over a 12-month period.

"This is probably the worst economic calamity the state has ever seen," said David Marshall, chief financial officer at Gregg Industries, a 400-person iron foundry in El Monte. "It has got ramifications well beyond anything that we can begin to understand."

Gregg already has switched its production cycle from during the day to a night shift to save electricity, Marshall said, but he expects the rate hike plan approved Tuesday to cost Gregg at least $1 million this year.

Commissioners were forced to yell their votes over the din of jeering protesters, who wore tombstone-shaped placards that read: "R.I.P. Affordable Energy."

PUC Commissioner Jeff Brown bellowed back at protesters: "We cannot walk away from it. We cannot pretend that this is some sort of problem that we can walk away from."

The final rates were a revised version of a proposal released by PUC President Loretta Lynch last week. Lynch postponed a scheduled Monday vote to rework her plan after a massive outcry from businesses proclaiming the proposed rate hikes would doom California's economy and a critical statement from Gov. Gray Davis.

Commissioner Brown also indicated he had sought lower increases for commercial customers.

Since it unanimously approved the rate hikes in March, the PUC has crammed a year's worth of work into six weeks, struggling to fashion rates that simultaneously recoup the $5.2 billion the state has spent buying power for the customers of the state's two largest utilities and trigger enough conservation to help fend off some of this summer's expected rolling blackouts.

Customers of San Diego Gas and Electric Co. and those who buy electricity directly from energy wholesalers, such as the California university system, are shielded from rate hikes.