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FERC to respond to Southern California Edison lawsuit

Jan. 2, 2001—Under a court order, the U.S. Federal Energy Regulatory Commission will respond Tuesday to Southern California Edison Co.’s request the federal regulatory agency impose cost-based electricity prices in California.

A spokeswoman for the agency said the filing will be made late today.

The financially strapped utility unit of Edison International filed a writ of mandamus Dec. 26 with the U.S. Court of Appeals for the District of Columbia Circuit, asking the court to order FERC to “… fix by order just and reasonable cost-based rates … for sales in the markets operated by the California Independent System Operator Corp. and the California Power Exchange.”

In the continued jockeying among state and federal regulators, the California Public Utilities Commission (PUC) also filed a petition Dec. 28 supporting Southern California Edison. In its motion, the PUC complained California will suffer irreparable harm if the FERC orders permitting power to be sold for more than $150/MW-hr under certain conditions are not immediately reversed.

“It is critical that the court act promptly to require FERC to do its duty under the law,” the PUC said in its petition.

PG&E Corp. and Southern California Edison have also filed for electricity rate hikes of 26% and 30% respectively with the PUC, which is expected to make a decision Thursday. Consumer groups are fighting any rate hike. They say utilities brought the problems on themselves when the companies supported deregulation.

The utilities argue without the hikes they will be teetering on the edge of bankruptcy and will literally run out of cash within weeks. Short of the 30% rate increase requested, Southern California Edison said it would not be able to borrow enough money to buy power and would have to ration power to its customers in some sort of system of rolling blackouts.

The credit ratings agencies have threatened to downgrade these companies� ratings to �junk� bond status if there is no serious action taken by the PUC on rates. The utilities have accumulated $8 billion in debt through the end of October. By the end of December, this debt was expected to climb to $11 billion.

The debt was incurred after the utilities bought high-priced wholesale power without being able to pass the full cost to their retail customers. The two utilities are operating under a rate freeze that is supposed to last until the end of March 2002 or until the companies pay off their stranded costs whichever comes first.

To verify if the rate hike is necessary, the PUC selected two independent auditors to examine the books of the utilities and confirm if indeed the utilities were experiencing such a severe liquidity crisis that without rate relief the companies would be plunged into bankruptcy.

In its petition to the Washington, DC, appeals court, Southern California Edison noted on Nov. 1, and again on Dec.15, FERC found prices for the sale of short-term energy were unjust and unreasonable; that California’s wholesale energy markets are severely flawed; and those flaws provide sellers with both the ability and incentive to exercise market power.

Citing Section 206 of the Federal Power Act, Southern California Edison said whenever FERC makes such findings the agency is obliged to ‘determine the just and reasonable rate … to be thereafter observed and in force and shall fix the same by order.’