California PUC refutes DWR allegations

The California Public Utilities Commission disputed charges the agency is responsible for keeping electricity prices higher than necessary.

The PUC and the California Department of Water Resources have been feuding ever since the PUC defeated a controversial rate agreement state officials said was necessary to issue a record $12.5 billion in power bonds.

The DWR, which is responsible for buying a portion of the state’s electric power needs, Friday completed estimates of what it will need from ratepayers to pay for power it buys on behalf of the cash-strapped utilities.

Although the DWR reduced the amount 20%, compared to July estimates, it said electric rates can only be decreased 5.5%. The revenue requirement is $17.2 billion, compared to $21.45 billion in July. DWR said rates can’t be lowered any more because the PUC didn’t approve the rate agreement in time. It claimed the delay in issuing the rate order caused financing charges to escalate.

The California Public Utilities Commission on a 4-1 vote Oct. 2 defeated the agreement state officials said was needed to issue power bonds. Commissioners objected to provisions that would have forced the PUC to relinquish its oversight role over whether electricity rates are just and reasonable.

“DWR’s newly reduced revenue requirement shows that the PUC was correct in resisting the pressure to rush into hurried decisions on the rate agreement and rate order,” said PUC Pres. Loretta Lynch.

The proposed agreement set out a method of meeting the DWR’s revenue requirements for its power purchases on behalf of the state’s electric utilities. The payments would have been funded by California electricity customers and used as collateral to issue the bonds and to repay the interest.

The state proposed issuing bonds to repay $6 billion borrowed from the general fund to buy electricity beginning in January and to fund future power purchases. The DWR stepped into buy power after Pacific Gas & Electric Co., San Francisco, and Southern California Edison Co., Rosemead, couldn’t pay for wholesale power when prices skyrocketed. The utilities were caught between high prices and frozen retail rates.

“DWR has changed it [revenue requirement] four times since May each time reducing the cost estimates for electricity,” Lynch said. “Instead of playing the blame game, DWR should make sure it has provided all the information that the parties are entitled to by law.”

By not providing access to its revenue estimating model, Lynch said, DWR itself delayed approval of the revenue requirement for months.

The agencies also clashed over whether delaying suspension of direct access hurt California consumers. Direct access allowed customers to directly contract for electricity bypassing the utilities and the DWR power purchases. DWR alleged increased participation in direct access reduced the number of customers who will help retire the debt for DWR electricity purchases.

Lynch said the delay in suspending direct access was also at the DWR’s request in a July 2 memo. The PUC suspended direct access Sept. 20 after lawmakers recessed. The legislature was considering several bills dealing with direct access.

More direct access customers just means DWR has to provide less power, lowering its revenue requirement, Lynch said. “If DWR has contracted for too much electricity in 2003 and beyond, the increase in direct access will exacerbate that situation,” she said.

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