III. What Must be Determined on an Immediate, Emergency Basis?
There are no easy choices before us. Since mid-June, we have seen prices in the wholesale electricity market skyrocket to staggering levels as a result of the severe dysfunction of the California wholesale electricity market. Because the Commission determined that the rate freeze has ended in San Diego, ratepayers in San Diego Gas & Electric Company's (SDG&E) service territory saw their electric bills double and triple over the summer. Several investigations have been initiated at the state and federal level into the causes of California's dysfunctional electricity market.
We initiated I.00-08-002 in August to investigate the impact of the wholesale market dysfunction on retail electric rates. FERC began its own investigation and, despite finding that wholesale electric rates are not just and reasonable, chose to lift price caps, and to refrain from devising a remedy under
Section 206(a) of the Federal Power Act (16 USC Section 824e(a)),8 while making a number of other changes that add to the complexity and uncertainty of the commercial relationships. These actions have left California's utilities and ratepayers prey to wholesale electricity sellers who immediately quadrupled and quintupled their prices above already unprecedented levels. As a result utilities state that they are facing insolvency; consumers' economic well-being is threatened by exorbitantly high bill and reliability concerns; and California's economy is jeopardized.
We recognize that we must take immediate action in this difficult and uncertain environment. While we must face economic realities, we must also ensure that any actions we take will protect California's consumers. Therefore, at this point, we will take action to enable the utilities' continuing ability to finance wholesale power purchases, but will do so in a manner that will have the least impact on consumers. We do not find that the rate freeze has ended, but we believe we can grant interim relief, subject to refund, without making such a finding.
8 This statute provides in pertinent part: Whenever the Commission, after a hearing had upon its own motion or upon complaint, shall find that any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order.
