Utilities Question Rate Calculations

California’s big utilities expressed serious doubts Friday about how state officials plan to divvy up the revenue from higher electricity rates.

State officials, however, said they are planning to revise the way they allot the rate increase of 3 cents per kilowatt hour amid questions over whether there will be enough money to cover electricity costs for the utilities and the state Department of Water Resources.

The DWR was forced to begin buying electricity for the utilities in mid-January when generators refused to sell to cash-strapped Southern California Edison and Pacific Gas & Electric Co. On July 22, the DWR said it would need only 1.65 cents of the increase and that further increases would not be required in the “foreseeable future.�

PG&E;, Edison and San Diego Gas & Electric Co. told state utility regulators Friday that the DWR’s data is full of errors and may not lead to accurate rates.

Edison told the state Public Utilities Commission it wanted to ensure that the higher rates charged to its customers do not subsidize ratepayers for other utilities.

In an Aug. 1 letter to Paul Clannon, chief of the PUC’s Energy Division, the DWR said it decided to revise its revenue requirement forecast after a round of questions from the utilities. The questions pointed the DWR to additional information “which warrants some adjustments to the revenue requirements,� the letter said.

Navigant Consulting Inc., the Chicago-based company that is advising the DWR on how much money it will need, does not expect the changes to be substantial, said Frank Perdue, a principal in the company’s Sacramento office.

The state is issuing $12.5 billion in bonds to pay for the electricity it purchased on behalf of the utilities. The DWR said it will need about 1.65 cents out of every kilowatt hour sold to service the bond issue, an amount state energy officials said left enough money for the utilities to pay their large debts from the energy price spike of the last year and their operating expenses.

The utilities have expressed concern that the DWR will siphon off so much money to cover its energy purchases that there won’t be enough left for utility expenses without another rate increase.

Bill Marcus, an economist with JBS Energy Inc., which consults for the Utility Reform Network consumer group, said the DWR’s forecast needs substantial revision because it has inconsistencies and questionable assumptions.

He said the forecast projects natural gas prices to be more than $7 per million British thermal units, the standard measurement. But futures contracts for natural gas are below $4 per million BTUs, he said. The price of natural gas is an important assumption because it is a key component of energy generation.

The utilities said they are angry that they were not given more time to comment on the DWR’s calculations. The deadline was Friday, even though the final the DWR filing will be Tuesday.

“How do we respond to something that will be revised?� said Southern California Edison spokesman Clarence Brown.

Separately, lobbying reports filed this week showed that Edison International spent more than $6 million trying to influence state politicians during the first half of this year. Most of it--$5.7 million--came in the second quarter as the company sought support for its agreement with Gov. Gray Davis to sell its transmission network to the state and to float bonds to pay off debts.

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Times staff writer Miguel Bustillo contributed to this report.