SACRAMENTO — Consumers will have to help bail out two giant utilities that say they have lost $8 billion because of a retail rate freeze and big increases in wholesale electricity prices, Gov. Gray Davis said Tuesday.
“They are going to have to participate in the solution, but there is nobody who is more uppermost in my mind than consumers,” Davis said.
Two consumer advocates, however, questioned the governor’s sincerity and said a deal that raised consumers’ bills to cover just half of the $8 billion would actually fully repay the utility companies.
“If we were uppermost in his mind I don’t think that his first action would be to figure out how can we bail out the utilities,” said Nettie Hoge, executive director of The Utility Reform Network, a watchdog group.
“I am very skeptical of
any kind of closed-door
negotiations between the governor and the utilities.”
The utilities, Pacific Gas & Electric Co. and Southern California Edison, say they are caught between a temporary retail rate freeze imposed as part of utility deregulation legislation passed in 1996 and the recent increases in wholesale prices for electricity.
They have filed lawsuits against the state seeking the right to raise their rates to get the money back.
Settlement talks with the Davis administration could yield a smaller figure for the companies. But consumer advocates say that even if the governor agrees to a plan to raise rates only enough to return half the money, the utilities would, in effect, be fully compensated.
“The reality is the $8 billion figure doesn’t reflect the amount of money utilities themselves make from generating power,” said Harvey Rosenfield, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.
“Fifty percent of the money utilities claim to have spent on power they actually got back themselves because they (also) sold power to the power exchange.... When they say they are out $8 billion they are only out $4 billion.”
Davis wouldn’t say how much of the cost consumers should have to pay except to say he would not support any plan that “unfairly burdens consumers.”
“I have made it clear to all parties that they are not recovering their costs, they are recovering only part of their costs,” he said. “Consumers, while bearing some of the burden, are not going to bear all of the burden.”
Davis said he couldn’t run the risks involved if the two utilities declared bankruptcy.
“If Southern California Edison runs out of cash, as they will at some point in the not-to-distant future, they will submit a plan to reduce the amount of power they provide,...” he said. “The lights will go off for at least five or six hours a day for roughly 50 percent of their service market.”
But Rosenfield questioned whether the two companies financial woes are that serious.
“There’s absolutely no evidence of that,” he said.
“Their stock prices are almost as high as they have ever been. If a company the size of Edison were about to go under, Alan Greenspan would be talking about a bailout.”
Davis said he would not support a bailout plan that did not have the “full benefit of full participation and consultation with the consumer groups.”
But Hoge, Rosenfield and Michael Shames, executive director of Utility Consumers’ Action Network, a San Diego-based group, said they had not been consulted by the governor.
Hoge said the utilities don’t want consumer groups involved in the negotiations “because we know when they are lying.”
She said she was concerned that the state Public Utilities Commission would try to raise the retail rate freeze when it meets Thursday.
Spokesmen for the two companies acknowledges that the utilities make money on electricity sales from their remaining generation facilities but said that revenue shouldn’t be counted against what they pay for electricity from other sources.
Ron Low, a spokesman for PG&E, said most of the money PG&E receives from electricity sales is required to be used to pay off debts generated by its unprofitable power facilities.
“The time is drawing near when we will no longer have the financial ability to enter into the market and purchase power for our customers,” he said.