When state Sen. Debra Bowen, D-Redondo Beach, took over as chair of the Senate Energy, Utilities and Communications Committee two years ago from San Diego Democrat Steve Peace, the chief architect of the state's electricity deregulation law, she had little inkling of the coming crisis. At the time, power was plentiful, rates were cheap and the only open question was how much ahead of schedule the state's three electric utilities would pay off their bad debts.

Now, Bowen is one of the players at the center of the power meltdown. Any state legislation to clean up the mess must pass through her committee. And what a mess it is. A power shortage across the Western U.S. has been exacerbated by what nearly everyone now acknowledges is a flawed deregulation law. San Diego Gas & Electric customers, the first to face a truly open market, were slammed last summer with bills three to four times higher than the summer before.

Last month, the crisis spread to the state's two other electric utilities, Southern California Edison and Pacific Gas & Electric. While wholesale electricity prices shot up 50 times over 1999 prices, SCE and PG & E; had their electricity rates capped and were unable to pass on the higher costs to customers. As a result, they have racked up almost $9 billion in additional debts, prompting Wall Street rating firms to put them on credit watch and making it more difficult for them to borrow the money they need to buy power.

SCE and PG & E; have petitioned the state's Public Utilities Commission to allow them to raise rates 30 percent and 26 percent, respectively. The PUC meets this Thursday to decide how much of a rate increase to grant the utilities.

Just prior to testifying at PUC hearings on the issue last week, Bowen took time out to give her perspective on the power crisis to the Business Journal.

Question: Do you think the electric utilities should be granted the level of rate hikes they are seeking?

Answer: I haven't seen all the numbers. But any rate hike that is decided upon should not be retroactive. You shouldn't punish businesses and residents for power they used in the past, since it's now too late for them to respond by using less.

Also, I believe the utilities should bear some of the costs themselves. Wall Street needs to remember that the shareholders of the utility companies benefited enormously when rates were low and they were paying down their debts during the first two years of deregulation. The utilities made the bet that they would recover some of their costs because wholesale prices were lower than the capped customer rates. They should not escape all of the consequences of that bet when it goes bad.


For reprint and licensing requests for this article, CLICK HERE.