Year after California's power crisis, consumers likely won't see lower bills anytime soon

source: Karen Gaudette AP in SF Gate 2002.3.25

Jenny Lovrin used to rip open the natural gas electricity bill each month and find that she and her five roommates owed less than $100. This winter's
bills have hit $225.

"Every month I'm afraid to open that bill and see how much higher it's gotten" said Lovrin, a receptionist. "With six people it's hard to tell everybody
'Turn off the lights, don't use the heater as much."'

The end of March marks the end of one year since rolling blackouts and utilities' debts prompted California power regulators to raise electric rates,
partly to keep the utilities in business.

The emergency hikes mean customers of Pacific Gas & Electric Co. and Southern California Edison are paying among the country's highest rates. The
Public Utilities Commission later hiked rates for San Diego Gas & Electric Co. consumers as well.

Coincidentally, the end of March also marks the end of a rate freeze that was imposed by the Legislature's ill-fated 1996 plan to deregulate the state's
electricity markets. Utilities say that freeze plunged them into debt and ruined their credit ratings by preventing them from passing soaring wholesale
power prices along to ratepayers.

Despite recent lower wholesale energy prices, the end of the rate freeze won't bring relief any time soon to businesses and consumers like Lovrin. The
state still needs to recoup the roughly $10 billion it has spent buying electricity for the struggling utilities, and the higher rates likely will stay put until the
PUC decides consumers are paying enough to cover the costs.

"I think the most likely outcome is that rates will be at this level for a long time," said Severin Borenstein, director of the University of California's Energy
Institute.

"I don't think they're likely to rise any time soon, but I think that once the PUC has increased rates to this level, they will follow the path of least
resistance, which is to just leave them there," he said.

That's unwelcome news at LaurelGlen Farms, a horse ranch in Placerville that cut its electricity use by 31 percent last summer and still saw its bill nearly
double. Folks there hope PG&E or the PUC will grant them a $2,544.37 credit -- which they claim represents billing errors and unfair rates.

"I'm angry and it's just wrong and we all know it's wrong, and yet we're still plodding down the same path," said ranch spokesman Al Colley. "The
people feel helpless that they can't do anything."

Deregulation was supposed to lower rates through competition between energy sellers and the state's electric utilities. Instead, prices soared.

State officials claim plant operators were in cahoots with energy sellers last winter to close power plants for maintenance four times as often as the
previous year. With the plants off-line, the supply of electricity fell, forcing utilities to bid up the price of power from other suppliers and driving them to
bankruptcy.

Under the new rates for residential customers, prices rise sharply once a consumer reaches 30 percent above a "baseline," an estimate based on a
typical household's needs that varies according to seasonal temperatures, climate and neighborhood.

But baselines have not been readjusted in years. They don't acknowledge the prevalence of home electronics, and people who need air conditioning in
California's hot spots complain their allotments are too similar to customers along the breezy coast. Also, since the allotment is based on average
consumption in an area, a family living among single folks receives a smaller allotment than a family surrounded by other families.

"If you live in an apartment and you hardly use your stove or maybe have a TV on and that's about it, you're under baseline and effectively shielded
from the brunt of the energy crisis," said Doug Heller of the Santa Monica-based Foundation for Taxpayer and Consumers Rights. "But God forbid you
get married and have some kids because you shoot past that baseline real quick and the price increases multiply so quickly."