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Power deregulation woes create a tale of two Californias

January 05, 2001

LOS ANGELES (AP) — Like many Californians, business owner Ron Castro is critical of Thursday's utility rate hikes for Southern California Edison and Pacific Gas and Electric customers.

What really upsets him, though, is that only customers of those utilities are affected.

He owns a nursing uniform business in San Gabriel and lives in Montebello, cities east of Los Angeles that are in Edison's service area.

Around him, residents and business owners in Azusa, Los Angeles, Burbank, Glendale, Pasadena and Anaheim won't be subject to the rate hikes because they are served by municipally operated public utilities.

‘‘It's not fair,'' said Castro, 39. ‘‘I just feel like there's nothing we can do. We can't vote on it and we just have to take it.''

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The utility crisis has demonstrated that California, at least for electricity, is really two states: That served by the investor-owned utilities, where customers will be paying more; and that served by public utilities, where customers so far have been largely unaffected by the state's deregulation problems.

The state's 30 public utilities serve about 25 percent of all electricity customers in the state, said Stu Wilson, assistant executive director of the California Municipal Utilities Association.

They range from the Shasta Dam Public Utilities District in the north to the Imperial Irrigation District, which serves a region stretching from the eastern Coachella Valley to the Mexican border.

The Los Angeles Department of Water and Power, the largest publicly owned utility in the nation, serves 3.5 million customers.

Rates of municipally owned utilities historically have been lower than those charged by investor-owned utilities.

U.S. Department of Energy data from 1999 showed average residential rates charged by investor-owned utilities in California were 13.4 percent greater than those charged by public utilities.

That disparity will widen after Thursday's rate hikes for Edison and PG&E, which will be allowed to boost residential rates 9 percent and business rates 7 percent to 15 percent.

The utilities warn they face potential bankruptcy even with the increases.

Because public utilities generate their own power, they have not fallen victim to the skyrocketing costs of wholesale power that have bedeviled Edison and PG&E this year. It also means they can better control distribution, meaning their customers generally are not subject to the blackout threats faced by the rest of the state this year.

As the benefits of public utilities become more apparent, several municipalities are exploring forming their own. Among them: Davis, San Marcos, Berkeley and San Diego County.

In San Francisco, activists are trying to bring the issue to a vote.

‘‘Public power is an unsexy topic, and this crisis has brought it to the forefront,'' said Angela Alioto, a former president of the San Francisco Board of Supervisors who is leading the campaign to form a public utility there. ‘‘It will finally let people understand what public power is.''

Alioto's group, the Coalition for Lower Utility Bills, already has collected more than 24,600 signatures in support. He said he expects the board of supervisors next week to give initial approval to placing the issue on the local ballot in November.

Experts say such efforts face tough obstacles, especially cost. A 500-megawatt plant in Yuba City that is expected to begin operations this fall cost $275 million.

Legal challenges from investor-owned utilities seeking to keep their customers and a licensing process that can take six months or more also complicate the change.

The benefits, however, have become more obvious by the day.

Margie Schubert, a general partner in a Pasadena industrial park, said she feels lucky the business draws electricity from Pasadena Water & Power. She said she can only imagine the potential increase in her bill, which runs $6,000 to $7,000 a month, if the park was served by Edison or PG&E.

But Schubert said she also knows how the other side feels.

‘‘We're thrilled about having our business in Pasadena,'' she said. ‘‘But my home is in Arcadia, so I'm expecting a pretty good-sized increase and trying to downsize things there.''

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