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A Deal is a Deal: Utilities’ Attempts to Break Rate Freeze Should be Blocked

Jan. 3, 2001

A Deal is a Deal: Utilities’ Attempts to Break Rate Freeze Should be Blocked

Investor-owned Utilities Want Rewards, Not Risks from Deregulation

WASHINGTON, D.C. — The California Public Utilities Commission (PUC) should reject a request by Southern California Edison and Pacific Gas & Electric to rewrite the rules of electric utility deregulation by raising consumers electric bills as much as 76 percent over the next two years. The PUC is scheduled to rule on the request Thursday.

“California consumers have been lied to,” said Wenonah Hauter, director of Public Citizen s Critical Mass Energy?and Environment Program. “They were told that their electric rates would go down and that utilities would assume the risks of a free marketplace. This bailout plan shows that the utilities believe in the free-market only when they profit. It is now clear that deregulation is a failure and should be repealed.”

When deregulation legislation was sold to the California public in 1996, the rates consumers pay for electricity were frozen at 1996 levels until 2002. Utilities, which supported this rate freeze when they helped draft the law, now seek to end it, claiming that the price they are paying to buy their power from out-of-state suppliers far exceeds the rate cap they are allowed to charge consumers. It remains unclear, however, if the utilities are really strapped for cash.

“While California residents face the possibility of skyrocketing electric bills in the New Year, Edison International (parent of Southern California Edison) and Pacific Gas & Electric have enjoyed over $6 billion in combined after-tax profits since deregulation began,” said Tyson Slocum, senior researcher at CMEEP. “Since their shareholders were first in line to benefit from deregulation, they — not consumers — should be first to bear the risks.”

Public Citizen urges the California Public Utilities Commission, Gov. Gray Davis, and the California Assembly to reject this attempt to stick consumers with deregulation s tab. “The investor-owned utilities whispered promises of lower rates to consumers under competition,” Slocum said. “But all deregulation has given ratepayers are power shortages and rate hikes, with no end in sight.”

If the utilities cannot find the credit they need after slashing costs at their parent companies and suspending the million-dollar bonuses lavished on their executives, Public Citizen advocates allowing the utilities to declare bankruptcy. “If bankruptcy is declared, the state should acquire the utilities assets, Hauter said. “Instead of spending billions to line the pockets of CEOs and shareholders, Californians would be making an investment in controlling their own power, as in Los Angeles and 30 other communities.”

If the rate freeze is repealed, Public Citizen notes that this wouldn t be the first time consumers have bailed out the utilities. Utilities were allowed to add a surcharge onto electric bills, charging consumers more than $18 billion, to cover debts for the utilities past investments in nuclear power. This billion-dollar bailout meant consumers have been paying artificially high electric rates. “It s like deja vu all over again,” Slocum said. “Any rate freeze repeal must be offset by the $17 billion consumers have already bailed out the utilities for their bad investments in the past.”