Judge Weighs Surge in Calif. Power Rates

L O S  A N G E L E S, Feb. 12 -- A federal judge could determine the future ofthe state's electricity rates as California faces off in courtagainst a debt-ridden utility.

Southern California Edison sued the state Public UtilitiesCommission last November for refusing to lift a rate freeze thathas been in effect since the state deregulated its utilities in1996.

The company wanted to pass along some of its wholesaleelectricity costs, which have skyrocketed since last summer. Edisonargues it must increase its rate so it can recover the billions ofdollars it owes power generators.

The case goes before a Los Angeles district court judge today.

A similar lawsuit filed by Pacific Gas and Electric Co. wasrecently transferred to the same court. Both cases are likely to beconsolidated, although that hasn't happened yet. The two utilitiesserve nearly 9 million residential and business customers.

Edison Wins Round One

Edison won a preliminary victory in its lawsuit in January whenU.S. District Court Judge Ronald S.W. Lew agreed with the utility'scentral claim that regulating wholesale rates was a federal — not astate — concern. But he allowed the commission to pursue a claimthat Edison ignored opportunities to buy electricity at a lowercost.

The commission opposed Edison's application to raise rates, inpart, because it has not finished its review of the company's powerpurchases. Edison had originally sought a rate increase to help itrecover past costs as well as cover any current cost overruns.

After the state earlier this month committed $10 billion to buypower on behalf of the utilities, Edison dropped the demand forcurrent compensation. It is now seeking a smaller rate increase itsays is needed to recoup about $2.5 billion in past costs.

State Warns of 50 Percent Price Hike

The state argues that if the injunction is granted and Edisonrecoups its costs within one year, rates would rise by about 3cents per kilowatt hour — a nearly 50 percent hike. Ratepayers nowpay a state-capped 6.5 cents for the cost of power, which doesn'tinclude additional costs for transmission and service.