Edison Rate Hike Dissected

By Published On: June 24, 2011

Southern California Edison’s proposal to raise rates 14 percent is being scrutinized. The rate hike proposal, according to Edison, would add less than $5 a month to most residential customer bills. In a series of California Public Utilities Commission hearings, cities, businesses, and consumers are urging regulators to scrutinize the increase in the face of ongoing economic distress in the utility’s service area. “It does weigh very heavily on our decision as we view the utilities,” commissioner Tim Simon said June 20. The CPUC hosted a hearing in Long Beach, the biggest city in the utility’s territory. Included in the increase is Edison’s request for $35.2 million for executive compensation, according to an analysis filed earlier this month by The Utility Reform Network. That amount is out of step with what public utilities pay their executives, according to TURN consulting economist Bill Marcus. That is even in cases where operations are comparable to Edison’s. At the neighboring Los Angeles Department of Water & Power, for instance, chief executive annual compensation totals $380,000 compared to $7.4 million at Edison International--the utility’s parent corporation. Based in part on the comparison, Marcus recommends that the CPUC cut Edison’s request for executive compensation by $23 million to a total of $12.2 million. Simon agreed that the CPUC should critically examine executive compensation as it weighs the utility’s rate increase request. In a statement June 23, Edison said that even with the rate increase its residential customers would see monthly bills that still reflect the national average for household power bills. Executive compensation represents less than 1 percent of the rate hike request, according to the company. Edison focused on how its proposed rate plan would enable it to rebuild infrastructure installed 50 to 60 years ago after World War II. The utility stated its plan would make sure the grid in its service territory remains reliable and secure. The utility added its new revenue and spending plan would create 10,000 new jobs related to rebuilding projects. Long Beach resident Dave Hall testified that the increase would virtually wipe out the savings now enjoyed by Edison low-income customers enrolled in the CARE (California Alternate Rates for Energy) program. Enrollees receive a 20 percent discount. “I don’t think this is fair,” Hall said. Edison stated the average CARE customer would see a rate increase of $2.70 a month under its proposal. According to TURN’s analysis, 28 percent of the utility’s proposed rate increase is attributable to administrative overhead. Marcus noted that ordinary businesses would have an incentive to control such administrative costs. In contrast, Edison is “focused like a laser beam” on such spending because it could be added to the utility’s “rate base,” he asserted. Edison spokesperson Gil Alexander said TURN’s analysis contained errors and that the utility’s request contained “no dramatic increase in overhead expenses.” Representatives from Downey, Huntington Beach, and other cities that pay street lighting bills voiced anxiety that the rate hike could undermine their already distressed financial conditions. Alexander said Edison is working to address city concerns and that the tariff for street lighting may be modified. Marcus is urging the commission to instill “discipline” at the utility by forcing it to prioritize its spending plans and eliminate unnecessary items, such as building new parking garages, computer systems, and paying for other capital items that don’t produce power or make the system reliable and could be addressed though lower cost strategies. He suggested, for instance, Edison could rent parking rather than build it. Simon said that while the hearings on Edison’s rate plan have been useful, he was disappointed that the CPUC’s outreach effort resulted in only sparse attendance. He urged commission staff to devise more effective ways to let people know about how they would be affected and how they can participate in the ratemaking process. Commissioner Mike Florio is planning a series of meetings aimed at improving the commission’s outreach effort to increase the level of public participation in CPUC proceedings.

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