Posted on 03/23/2002 6:05:53 PM PST by randita
PUC lets big users keep cheap deals
Critics say the decision means most ratepayers will have to pay more.
By Carrie Peyton -- Bee Staff Writer
Published 5:30 a.m. PST Friday, March 22, 2002
The big businesses, cities, universities and others who lined up cheap electricity contracts during the state's power crisis can hang onto the deals, but they'll have to pay new fees, utility regulators decided Thursday.
In a long-awaited and much-postponed vote, the state Public Utilities Commission backed away from a proposal to void all contracts signed between July 1 and Sept. 20.
The 3-2 decision was praised by large consumers but blasted by small ones, who say they will be left behind to pay for the costlier power purchased by the state Department of Water Resources.
"Every penny the big businesses save will be on the backs of the rest of us," said Mike Florio, an attorney for The Utility Reform Network.
The vote also angered some key Democratic lawmakers, who warned that it will undermine the PUC's relationship with the Legislature and potentially cost consumers billions.
"I'm skeptical the PUC will be able to protect California's ratepayers from having another $4 billion to $5 billion in power costs loaded onto their backs," said state Sen. Debra Bowen, D-Marina del Rey.
Bowen suggested that most of the state's consumers will lose out during the coming months of PUC hearings into how steep the new charges, called "exit fees," should be for those who have left standard utility service for the special contracts.
The decision was clearly a pro-business action, and "that's not necessarily a bad thing," said Commissioner Jeff Brown, who developed the winning proposal and forced it to a vote over the objections of PUC President Loretta Lynch.
"There's nothing wrong with business in California thriving. That provides jobs," he said. "On the other hand, you have to find a way of protecting the bundled customers," the mostly residential and small-business users who don't have special deals for lower-cost power.
He said that one way his proposal does that is by leaving the door open to go back later and void the contracts if the exit fees aren't set quickly or aren't fair to all consumers.
Among those relieved by Thursday's vote was the University of California system, which estimated that it is saving $12 million annually through its power purchase contracts.
"We're willing to pay our fair share" of costs racked up by the state during the power crisis, said UC spokesman Charles McFadden, but he anticipates that the exit fees will be far less than $12 million.
The vote was also praised by Pacific Gas and Electric Co., which said it is a way to ensure that no costs are unfairly shifted to any group of consumers.
Now the PUC is likely to take at least three months, and possibly well into the fall, to determine how much should be paid by customers who get their electricity directly from non-utility suppliers.
Those "direct access" customers are the last vestiges of the consumer side of the state's experiment with electricity deregulation. The idea was to allow unregulated businesses to buy and build power plants. Then consumers could shop around and chose to get their electricity from different power providers who competed with utilities such as PG&E.
Customer choice never caught on widely with residential power users, but many businesses signed up, then bounced back and forth between utility service and direct access service while the state's power crisis unfolded.
The Legislature slammed the door on direct access in early 2001, when it passed a bill calling for the PUC to suspend it. Otherwise, it feared that too few customers would be stuck with power bills being run up by the state.
But the PUC didn't act until Sept. 20, partly because lawmakers urged delays while they considered exit fee legislation. The September PUC vote banned any new direct access contracts immediately and called for further consideration on whether the ban should later be made retroactive.
Since then, power sellers and large consumers have besieged the PUC and the Legislature, looking for ways to preserve or extend the ability to buy lower cost power.
The issue is critical for virtually all of the state's electricity-intensive businesses, including high tech, cement, steel, food processing and retailing, said D.J. Smith, who represents the California Large Energy Consumers Association.
The vote, he said, was "a victory for most of the heavy industrial, commercial and agricultural load in the state."
Many of the state's biggest electricity users -- who consume about 12 percent of all the power delivered by PG&E, Southern California Edison and San Diego Gas & Electric Co. -- now are direct access customers.
That could grow to 15 percent under the new decision, which allows contract reassignments and renewals, said Commissioner Carl Wood, who had backed a tougher proposal to revoke many of contracts.
With the debate now turning to how large exit fees should be, lobbyist Smith said he will argue that business users should pay an exit fee that would cover their share of the state's power bonds and Edison's settlement with the PUC. But they shouldn't have to pay for the state's long-term power contracts unless the state has to sell power for a loss, he said.
Others, including Wood, say much more should be loaded onto the exit fee, including costly utility contracts with alternative providers called qualifying facilities.
Brown said the fee must be set so that customers who stay with PG&E or other utilities are no worse off than they would be if no one had a direct access contract.
One early estimate puts that figure around $340 million annually, or about 2.25 cents per kilowatt-hour for all electricity used under the special contracts, he said.
It is unclear how the fee debate will unfold with newly appointed Commissioner Michael Peevey widely seen as likelier to support businesses' concerns.
Peevey joined Brown and Republican appointee Henry Duque on Thursday's vote.
That three-member majority forced a vote on the issue over the objections of Wood and Lynch, who had asked that it be held for more study. Lynch told fellow commissioners that several lawmakers had asked the PUC to delay the vote.
Three key Democratic senators -- Bowen, Senate President Pro Tem John Burton of San Francisco and Byron Sher of Palo Alto -- wrote Brown and Peevey asking them to hold off on voting so they could discuss the best way to get an exit fee in place.
At this point, they wrote, direct access "benefits less than 1 percent of customers at the expense of the other 99 percent."
The Bee's Carrie Peyton can be reached at (916) 321-1086 or cpeyton@sacbee.com.
Davis should be required to surrender his estimated $30M relelection war chest into the state utility kiddy.
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SEC. 9. A bill of attainder, ex post facto law, or law impairing the obligation of contracts may not be passed.
March 21, 2002 PUC: 26 Docket #: R. 02-01-011.
Media Contact: PUC Press Office - 415.703.1366 - news@cpuc.ca.gov
The California Public Utilities Commission (PUC) today in a 3-2 vote affirmed September 20, 2001, as the suspension date for Direct Access, which allows customers to purchase electricity from a company other than an investor-owned utility. The Commission will also look into using exit fees as a means of recovering from Direct Access customers some of the revenue the California Department of Water Resources (DWR) needs for electricity costs.
Among the findings of today's decision:
· Customers with Direct Access contracts as of September 20, 2001, can switch from one Electric Service Provider (ESP) to another - No Direct Access customer can add-on additional load;
· Contracts existing as of September 20, 2001, could be renewed or assigned to new parties;
· The Commission would strive to create an exit fee to impose on those customers continuing to use Direct Access, with the intent to provide a full contribution to the recovery of DWR procurement costs. The exit fee would be created and approved in a separate Commission proceeding. Today's decision anticipates that exit fees would equitably allocate DWR costs between bundled and Direct Access customers.
"The current Direct Access suspension date of September 20, 2001, should be maintained because major institutions, such as the University of California, the California State University system, and the L.A. Unified School District, would suffer adverse impacts if Direct Access is suspended as of July 1, 2001," said Commissioner Geoffrey Brown. "Bundled customers will be indifferent to Direct Access when equitable exit fees are imposed."
Commission President Loretta Lynch and Commissioner Carl Wood dissented. "Direct access is a hidden tax on residential and small business customers to subsidize the electricity bills of the big users. By the vote today, this Commission has failed in its duty to protect the people of California," Commissioner Wood said.
On September 20, 2001, the Commission suspended Direct Access and announced that it would consider changing the date to July 1, 2001. After receiving input from utilities and other interested parties, the Commission determined the date for the suspension of Direct Access will not change.
I checked today and your book has still not been "catalogued" at the Transylvania County Library. IOW, it's still in the basement on a pile of other books. Sheesh...
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