Power-crisis bill? Try $6,800 per household

Utilities: And that figure, which represents costs over the next 10 years, may be conservative.

September 3, 2001

By KATE BERRY The Orange County Register

Consumers, hold on to your pocketbooks.

State officials, utility companies and energy consultants are calculating the financial blow from the state's energy crisis - and the results aren't pretty.

One preliminary estimate, by Pacific Gas & Electric, San Francisco's bankrupt utility, puts the price at an average of $6,800 over the next decade for each of the 10 million ratepayers of the state's three big investor-owned utilities. That $68 billion is the state's estimate of its power-buying costs.

But the costs don't end there. The state's purchases account for only one-third of the power supplied by the state's three largest utilities. Add to that a hodge-podge of other anticipated costs, from the bailout of Southern California Edison to conservation programs to upgrades to transmission lines, and the price rises.

Economists believe California's energy crisis will go down in history as one of the most-expensive public policy fiascoes ever, with some estimates putting the tab at more than $100 billion.

"Think of it as though the governor bought into a bunch of dot-coms and simply lost all his money - only it's going to be ratepayers' money," said Robert McCullough, who runs a Portland-based consulting firm that works with the electricity industry.

Though consumers may never know the actual cost of the state's 15-month energy imbroglio, that hasn't stopped consumer groups and the utilities from trying to figure out the costs - and demanding answers. Many blame Gov. Gray Davis and his lock on the state's power-buying arm, the Department of Water Resources, which has not released complete information about state power purchases. The state released copies of $43 billion in long-term contracts only under a court order.

Not every ratepayer will pay an equal share. Residential rates were tiered this year so consumers who use more electricity pay higher rates.

Sam Sarem, a retired petroleum engineer who owns a 2,450-square-foot, four-bedroom home in Yorba Linda, is paying $260 a month more for electricity today than he did a year ago - even though he reduced his power use by 20 percent, and got a rebate for doing so.

Sarem's electricity bill jumped a whopping 313 percent to $344.79 in July.

"This is hitting everyone in the pocket," he said. "If it was our patriotic duty or something we had to do, fine, but this is just from stupidity."

At least 3 million California consumers haven't been touched by the crisis that grew out of power deregulation because they are served by municipal utilities like Anaheim Public Utilities or the Los Angeles Department of Water and Power, which weren't deregulated.

Energy regulators at the state's Public Utilities Commission in San Francisco have been trying for months to add up the disparate costs to determine if more rate hikes are needed for customers of the investor-owned utilities.

The commission raised electricity rates in March by an average of 3 cents a kilowatt-hour, after a 1-cent increase in January. So far, the PUC has said it doesn't expect more increases.

"We started with rates that were 40 percent above the national average in 1996, and we're ending with rates higher than that," said Matthew Freedman, a lawyer for The Utility Reform Network, the consumer group known as TURN. "Consumers will be paying inflated electricity prices for five to 10 years because they're locked into these contracts."

Since the state's general fund has been depleted of $8.6 billion for power purchased this year alone, the state plans to sell $12.5 billion in bonds that will be repaid by ratepayers. Because state lawmakers don't want consumers to experience "rate shock," they are spreading the costs over 10 years.

Beyond that, California businesses, whose rates have risen a whopping 50 percent or more this year, will be responsible for repaying $2.5 billion of a proposed $2.9 billion bailout for Edison, the state's second-largest utility. And Gov. Gray Davis' strategy to avoid rolling blackouts cost $600 million in taxpayer money from the general fund to repay ratepayers for conserving energy.

The scattered costs - many of which aren't yet fully known - have left economists scratching their heads over how to total it all up.

Severin Borenstein, director of UC Berkeley's Energy Institute, agreed, adding that fluctuating natural-gas prices and other variables make it impossible to figure out how much consumers will pay.

"The long-term effects of this crisis will be substantial," said Freedman, at TURN. "And we're not out of the woods yet because there is still a possibility of more rate increases."

http://www.ocregister.com/news/eleccost00902cci.shtml

-- Martin Thompson (mthom1927@aol.com), September 03, 2001

Answers

Don't do that to me, Martin. I can't spare $6,800 right now. My commodities broker is busy blowing it for me.

-- JackW (jpayne@webtv.net), September 03, 2001.

Sorry Jack. At least you have a whole decade to pay it off.

-- Martin Thompson (mthom1927@aol.com), September 03, 2001.

This debacle is as bad as the savings and loan crisis except instead of a nation paying off the debt this time its only a state and more than that, just a percentage of the ratepayers. The only thing this is going to do is force a lot of people to move out of California. I see property values dropping from now on in CA.

-- Guy Daley (guydaley1@netzero.net), September 03, 2001.

What a mess!

-- Uncle Fred (dogboy45@bigfoot.com), September 05, 2001.