Amid a dramatic disruption, the California Public Utilities Commission yesterday unanimously approved a rate hike for the 25 million customers of Southern California Edison Co. and Pacific Gas & Electric Co., effective immediately.
The five-member commission met at 10 a.m. in San Francisco, heard input from lobbyists and industry experts and voted on the measure by 12:35 p.m.
The decision, put forth by Commission President Loretta Lynch grants Southern California Edison and Pacific Gas and Electric authority to increase rates by adding a three-cent per kilowatt-hour surcharge in response to the current power emergency -- the largest rate hike in California history. The increase will be on top of the 9 percent to 15 percent hike the CPUC approved in January and an additional 10 percent increase already scheduled for next year. According to Lynch's proposal, the new surcharge "will cost the customers of the utilities approximately $2.5 billion dollars annually."
"After an independent accounting review, an evidentiary hearing and a full opportunity to comment and testify provided to all parties, we conclude that the utilities have established the need for additional revenues on a going-forward basis in order for those utilities to comply with their statutory duty to provide adequate electric service to their customers. Today's decision does not address recovery of past power purchase costs and other costs claimed by the utilities," the now-adopted proposal reads.
Despite a finding by the Federal Energy Regulation Commission that current wholesale power rates are unreasonable, utility companies are subject to the wholesale rates. In the state's 4-year-old energy framework -- given the misnomer of "deregulation" -- utilities must purchase power from companies that own generating facilities. The purchases take place in the California Power Exchange and are regulated by the state.
"An increase in retail electric rates is necessary because without it, the state's electricity system and its economy will be severely jeopardized," wrote Lynch.
The state is producing about 30,000 megawatts per day, according to PG&E spokesman Jon Tremayne, and will need 45,000 in the summer months when consumers start using their air conditioners. He said an additional 13,000 megawatts could be generated by plants in the state, though for unknown reasons, the plants are not operating.
California utility companies have been struggling to survive since the state, in its more aptly named "re-regulation" scheme, forced them to sell generating equipment and subsequently buy power from the new owners. Yet utility companies are required to abide by a state-enforced rate freeze. In effect, utilities are paying through the nose for energy they sell at a below-cost state-controlled price. The result is the near collapse of the state's utility companies.
PG&E has defaulted on some of its wholesale power payments and claims it cannot pay additional power bills that are coming due. Likewise, SCE has reached its credit limit and has suspended payment on its energy purchases.
Non-payment of energy purchases has become a common occurrence in the state, where even renewable energy providers are feeling the crisis in the pocketbook. Often seen as a viable solution to energy-resource scarcity, companies that generate renewable energy -- such as wind and water -- are feeling the heat, as well. Because utility companies can't pay the bills, some smaller renewable energy companies have had to shut down their windmill turbines -- the primary tool of wind power.
"Smaller companies may face difficulties in continuing to operate without revenue," said Dave Roberts, vice president of Seawest Wind Power. Seawest owns more than 17,000 turbines at Altamonte Pass and San Gorgonio -- two of California's three primary wind-power generating areas, commonly referred to as "wind farms."
"Property taxes are a big issue," added Roberts, because taxes "don't wait for revenue." There are other costs involved in wind-generated energy as well, including labor and general maintenance, he noted.
The thousands of turbines on wind farms dot portions of the California landscape like giant pinwheels. Owned by dozens of private companies, many of them are still turning, thanks to larger companies like Seawest, which continues to operate its turbines even though it's not being paid by the utilities.
Houston-based energy company Enron, which argued in conjunction with consumer groups that the CPUC-approved rate hike was unnecessary, has also continued operating its windmills, despite its customer's inability to pay for the energy it buys.
"We want to be part of the solution," said Enron spokeswoman Mary McCann, who quickly added the company may not be able to continue operating without pay indefinitely.
Wind turbines run at full capacity about 10 percent of the time, according to Second Wind, Inc. president Ken Cohn. Turbines generate some power about 60-80 percent of the time, averaging about a third of what they could generate if operated at full capacity all year.
While renewable energy may be part of the solution to California's energy crisis -- wind farms can be built in as little as six months, they can provide a more stable cost expectation compared to natural gas and they're cheaper to run than traditional power plants -- utilities have an immediate problem. The CPUC vote was requested by PG&E and SCE as an urgency consideration.
Just before the commission voted on the rate increase, Lynch clarified that the new rate reflects closer to a 26 percent increase, not the 40 to 50 percent increase reported by the media. Additionally, she noted residential customers who use less than 130 percent of the baseline allowance will be exempted from the surcharge, as will customers who benefit from low-income programs. Baseline amounts are set between 50 and 60 percent of the average electric use per household in a given territory, and they vary by utility company and region. In the Sacramento area, the baseline amount for summer is 13.8 kilowatts per hour per day and 11.6 kph/day in the winter. Customers who have all-electric homes are given a higher allowance. Lynch's so-called "tiered" system is intended to target "electricity hogs," she said.
As she made a motion to call the roll on the proposal, dissidents began yelling in the background. At least one man and two women shouted impromptu speeches at the commission, saying the hearing was not "public" since only lobbyists and industry experts testified and demanding the state "take over the generators." The women presumably were part of a group of four led by former Green Party senatorial candidate Medea Benjamin. Each held yellow signs in their right hands saying "We Won't Pay" and in their left hands saying "Public Power Now."
Lynch paused for a moment to say she welcomed public comment from those who "took the time to sign up" with meeting organizers but did not appreciate the outburst.
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