Inland California Customers of Electric Utility to Be Back-Billed for Charges Source: Knight Ridder/Tribune Business News Publication date: 2000-12-20

Dec. 20--SACRAMENTO, Calif.--Inland-area customers of Southern California Edison can expect to be back-billed for some of the $3.5 billion in electricity charges that the utility has not been allowed to pass along to ratepayers, Gov. Davis hinted Tuesday. "Everybody has to be part of the solution," he said.

But Davis also suggested shareholders of Edison and Pacific Gas & Electric will have to eat some of the $8.3 billion that the two utilities have been unable to collect on their power purchases this year.

In negotiations on how to resolve the back-billing issue, Davis said, "I have made very clear" that utilities "are not recovering their costs, they're only recovering a portion of their costs."

Utilities and manufacturers pushed for the electric deregulation experiment, which has "gone very bad," Davis said.

"If it hasn't worked, the consumers, while having to bear some of the burden, are not going to bear all of the burden."

Davis vowed not "to do anything that unfairly burdens consumers."

But he offered no details on how much homeowners' bills might rise. Published reports have said he wants to allow no more than a 10 percent rate hike to Edison and PG&E, an amount the utilities reportedly say is not enough to get them out of their financial hole.

The governor defended his administration's attempt in recent days to privately negotiate a deal with Edison and PG&E, which have sued the state in an attempt to bring an early end to a retail rate freeze contained in the state's 1996 electricity-deregulation law.

Allowing the two utilities to tumble into bankruptcy would disrupt power delivery and harm the state's economy, he said.

California's electricity crisis has sent prices for bulk power soaring since summer. The skyrocketing prices have been blamed on short supply, strong demand, surging fuel costs and flawed market rules established after the Legislature and then-Gov. Pete Wilson approved the law in 1996.

The state experienced a Stage 2 alert Tuesday, which meant reserves were expected to drop below 5 percent.

Officials asked certain businesses in Northern California to idle operations. The businesses have agreed to lower, "interruptible" power rates -- which means, in a pinch, they're the first to lose their juice.

Also Tuesday, policy makers and energy industry officials reported progress in talks about possible solutions to California's energy mess on both coasts.

In Washington, Energy Secretary Bill Richardson convened a meeting of representatives of electric utilities, power plants, energy marketers, operators of the state's grid and the California Public Utilities Commission.

The main topic of discussion was how to encourage more long-term contracts for power.

Federal regulators and power generators and marketers have said California must make it easier to build more power plants and must encourage its privately owned utilities to sign long-term supply contracts and stay out of the volatile spot market for bulk power.

The 1996 law pushed the investor-owned utilities into the spot market, but state regulators this year reversed course.

"I think everyone has reached the conclusion that reliance on the spot market, with all of its problems right now, is something to be minimized," said Gloria Quinn, an Edison spokeswoman.

But consumer groups worry utilities will lock into prices that prove to be inordinately high in future years, providing yet another windfall for generators.

"This is a horrible situation," said Harry Snyder, senior advocate for Consumers Union.

In Sacramento, Davis appealed to the Clinton administration to give California a seat on the Federal Energy Regulatory Commission. A Republican slot on the five-member panel is vacant.

The Democratic governor said he had submitted to President Clinton three names -- all Republicans from San Diego, where homeowners' bills doubled and tripled last summer as a retail price freeze in the 1996 law came off for the first time.

Davis also urged Richardson to extend last week's emergency edict that required power marketers to keep selling into California, despite worries about the solvency of Edison and PG&E. The current order expires Thursday.

The California Independent System Operator, the agency that controls most of the state's power grid, took the unprecedented step Tuesday of invoking Richardson's order providing the emergency power supply needed to avert rolling blackouts.

Speaking by phone to the gathering in Washington, Davis warned power generators and marketers that "their greed would be the undoing of deregulation in America."

But Lynne H. Church, the chief Washington lobbyist for the generators and marketers, bristled at Davis' description of such companies as "pirates." She also dismissed his warning that states would re-regulate electricity.

Deregulation "does work, it works in places other than California and it can work in California," Church said in Sacramento.

"The profits that were made (by generators) this summer were based on working within the system," said Church, president of the Electric Power Supply Association.

The Associated Press contributed to this story.

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-- Martin Thompson (mthom1927@aol.com), December 20, 2000