Major business and industrial customers of Southern California Edison could get hit with huge surcharges on their electric bills under a new Edison rescue package being drafted by top-ranking Democrats in the state Assembly.

The plan, which as of late last week had yet to be put into bill form, would place most of the burden of paying off Edison's accumulated $3.1 billion in debt on the shoulders of some 3,600 major Edison customers. And it would also cast those customers off to the open market in January 2003.

"If it passes in its current form, this could be disastrous for California businesses," said Jack Stewart, president of the California Manufac-turers and Technology Association. "Not only would these businesses see huge rate increases, they would also be thrust into a totally dysfunctional market."

The plan, which is being drafted by Assembly Speaker Robert Hertzberg, D-Van Nuys, and Assembly Speaker pro-tempore Fred Keeley, D-Boulder Creek, is the latest in a series of rescue packages for the beleaguered utility.

Gov. Gray Davis has put forward an agreement with Edison to have the state pay $2.76 billion for its transmission grid, with the money going to repay Edison's debt. However, that agreement has run into stiff opposition from lawmakers who question whether buying only Edison's portion of the statewide transmission grid is practical. (Pacific Gas & Electric's April 6 filing for bankruptcy protection effectively took its portion of the grid off the table.)

Last month, as Davis' plan ran into trouble in the Legislature, another plan emerged; this so-called "plan B" would essentially use bonds to pay off the accumulated debt. But that plan drew criticism for adding to the state's bond debt at a time when the state was preparing a $10 billion bond measure to replenish the state's coffers depleted by power purchases.

Bonds would also be issued under the Hertzberg-Keeley plan, but they would be repaid by Edison ratepayers, not state taxpayers. For the first 18 months, all Edison ratepayers would see a 0.3-cent-per-kilowatt surcharge on their bills.

Then, starting in January 2003, Edison customers consuming more than 500 kilowatts of electricity per month would be charged 1.3 cents more per kilowatt for the duration of the bond payback period, estimated to be anywhere from 10 to 20 years. Edison customers using less than 500 kilowatts per month would see their surcharge lifted in January 2003.

The major customers using more than 500 kilowatts per month account for anywhere from one-fourth to one-third of Edison's total power load. They include supermarkets, shopping malls, major manufacturing plants, refineries and possibly public-sector entities like college campuses.

Those same customers would also be given the right to negotiate contracts with third-party electricity providers, the so-called "direct access" that many major business customers have been pushing for. (Whether or not companies that sign such contracts would still be required to pay the surcharge is not clear, although those familiar with the negotiations said it is likely.)

Edison officials last week said they had not seen the plan and could not comment on it.

But business lobbying groups expressed serious concerns about the proposal.

"We believe this plan unfairly targets our member companies," the CMTA's Stewart said. "If it passes, those that can pass on their costs to consumers will; those that are tied to global commodity markets and can't raise their prices will lay people off, shut their doors or relocate out of state."

And, even though they favor direct access, business lobbyists expressed reservations about this particular direct access proposal.

"When we said we wanted the right to go with direct access, it was to go into a market that was functioning like a market should," said Dominic diMare, energy issues lobbyist for the California Chamber of Commerce. "But this proposal says nothing about fixing the dysfunctional market we're now seeing. Our members would be cast off into a broken market where prices bear little or no relation to demand."

Neither Hertzberg nor Keeley could be reached for comment late last week; aides to both legislators said they were tied up in marathon negotiating sessions trying to hammer out details of the package.

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