Edison Receives OK to Boost Rates 8%

State regulators approved Thursday an 8% hike in electricity rates for customers of Southern California Edison -- the third increase this year for California’s second-largest electricity provider.

The action, which will help pay for upgrades to Edison’s power network and recoup increased operating costs, is another hit on consumers who already are reeling from soaring gasoline prices.

The utility, a subsidiary of Rosemead-based Edison International, estimated that the latest rate hike would boost the monthly bill for a typical household using 550 kilowatt hours of electricity to $86.42, an increase of 2.5%, or $2.11. Taken together, this year’s rate hikes at Edison have added more than $11 to the typical monthly bill.

The rate hike, which is retroactive to mid-January, will show up in bills mailed in August. Under the three-year revenue plan approved Thursday, electricity rates overall will go up an additional 1.9% in 2007, and a 2.6% increase will follow in 2008.

The utility serves more than 13 million people in a 50,000-square-mile area that includes central, coastal and southern regions of California, but not the city of Los Angeles and other smaller municipalities. About 800,000 of Edison’s 4.6 million customers are businesses.

About half of all customers will not be affected by Thursday’s action because they use relatively small amounts of electricity that are exempt from the rate increases. The amount awarded to Edison by the California Public Utilities Commission was substantially higher than what was originally proposed by the presiding administrative law judge, but it fell well short of Edison’s opening request.

“It’s better than it could have been,” said Marcel Hawiger, a staff attorney at the Utility Reform Network, a San Francisco consumer advocacy group. “But it’s still an increase, and residential ratepayers are already suffering from all sorts of increases.”

Edison’s reaction was muted. “We obviously filed for a lot more,” said Akbar Jazayeri, the utility’s vice president of revenue and tariffs. “But overall, I think we will be able to manage under what they have adopted.”

In a statement issued late Thursday, the company acknowledged the hardship on ratepayers, saying it was “concerned about the combined impact on customers of this change and the much larger rate increases earlier this year.”

Wall Street analysts cheered the PUC vote. In a note to investors, Daniel Ford of Lehman Bros. called the rate decision a “positive development” because uncertainty about future earnings had become a limiting factor on Edison’s stock price. The company’s earnings forecast for 2006, expected soon now that the rate issue is resolved, will “provide another positive catalyst in the near term,” Ford said.

Parent company Edison International’s first-quarter profit rose 28%, but operating earnings fell short of expectations primarily because of delays in winning the rate increase.

Edison shares, which dipped early in the day, reversed course following the vote to close at $41, up a nickel.

For the utility, the ruling amounts to an increase in rate revenue of $273 million in 2006, or $134 million after subtracting a one-time $140-million customer credit. Next year, higher rates will bring in extra revenue of $73.5 million, and an additional hike in 2008 will add $104 million to Edison’s coffers.

In January, the utility raised overall rates 9%, citing in part higher natural gas costs that are being passed through to customers under terms of state power contracts. In February, Edison rates jumped 5.5%, which the company said would cover rising natural gas expenses from other electricity contracts.

Commissioner Geoffrey Brown told his PUC colleagues that the increases were needed to help the company pay for system upgrades: “We have placed great faith in the utility’s desire to modernize its increasingly frayed infrastructure. They have, with this decision, the wherewithal to get the job done.”

Hawiger of the Utility Reform Network said the PUC caved in to pressure from Edison, which he said lobbied heavily for upward revisions after the commission judge proposed a net increase of $85 million for 2006, less than a quarter of the $370 million originally sought by Edison.

Over five revisions, the proposed increase grew by almost $50 million, of which $45 million will fund Edison’s “results sharing” bonus program for executives and others.

As a result of Thursday’s action, the utility’s total authorized revenue will rise $333 million, or 9.8%, to $3.7 billion this year, followed by increases of nearly 4% in 2007 and 5% in 2008. Those figures are larger than the rate increase calculations because they include the extra income that stems from adding new customers in Edison’s fast-growing service territory.