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NEWS RELEASE
Jan 25, 2001


CONTACT: Doug Heller - 310-392-0522 x309

Small Consumer Rate Protection Proposed to Restore Regulatory Controls Over Energy System

Consumer Groups, Legislators Introduce "Core/Non-Core" Legislation to Protect Rates for Residential and Small Business Ratepayers
Sacramento -- Much of California's electric system would be re-regulated to protect a core of residential and small business consumers, under proposed legislation unveiled today by State Senator Martha Escutia (Norwalk), The Foundation for Taxpayer and Consumer Rights (FTCR) and TURN. Called the "Small Consumer Rate Protection Act" (SCRP), the proposal requires that the power produced at utility-owned plants or pre-purchased under contract by PG&E and Edison is supplied at cost plus a reasonable profit to the state's small consumers.

"This is the best way to immediately protect California consumers from the dangers of the unregulated energy market," said Douglas Heller, consumer advocate with FTCR. "Fixing the state's energy crisis must include protecting the consumers who are most vulnerable to the profiteering of the private power industry."

The Small Consumer Rate Protection Act (also referred to as "core/non-core") requires the California Public Utilities Commission to set electric rates on a cost-of-service basis for the state's small consumers. Small consumers, under the proposal, are defined as those renters, homeowners, businesses and farms that use no more than 500 Kilowatts of energy during peak usage. An average home, for example, has peak usage of about 2 Kilowatts. Only 5,242 industrial customers in the state (and approximately 1,000-1,600 agricultural customers) are above the 500 Kilowatt threshold.

To fully serve the small consumers, the utilities will be required to purchase approximately 6-8% of their power on the wholesale market. Small consumers' rates will be based on a blend of the cost of in-house power, the pre-purchased contracts and the small amount of energy purchased on the wholesale market. Consumer rates, therefore, will be lower because consumers will be buying such a limited amount of energy from the energy companies who have manipulated the market to increase profits.

Big businesses that are not under the usage threshold will be allowed to purchase electricity directly from private energy producers or through the utility at the cost paid by the utility company. Currently, 13% of big businesses buy their power directly in the marketplace.

"Big business pushed for deregulation so they could cut deals in the marketplace. Residential and small business consumers never asked to be thrown into the market. This legislation gives the big businesses the deregulated market that they wanted while providing regulatory protections for the small consumer," said Heller.

stops the bleeding caused by deregulation
Because small consumers will pay regulated rates that include a profit for the utility and the utilities will not be required to charge big businesses less than they pay to procure the extra power, the utilities will no longer be spending more on electricity than they are allowed to charge ratepayers. This immediately stops the alleged "under-collection" that is at the heart of the financial crises of the utilities.

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