|Power to the People Threatened|
|Topic||Market Failure, Regulation, and Public Choice|
|Key Words||Regulators, rate increases, utilities, prices, costs, deregulation, consumers, bankruptcy, wholesale|
California state regulators have recommended emergency electricity rate increases for Southern California Edison and Pacific Gas and Electric. Although the utilities wanted increases of 26-30 percent, they were only granted 9 percent increases for residential customers. Consumers have already been hurt by higher prices for natural gas. There is also pressure from consumer groups for the utilities to absorb the higher costs.
The issue has arisen because, in the deregulated electricity industry, utilities may buy electricity from other U.S. producers. The booming California economy has required such purchases - and the utilities have had to pay spiraling prices. At the same time, the price they can charge consumers in California has been frozen from 1996 to 2002 by regulators. The utilities claim that they have lost a lot of money and are on the verge of bankruptcy. Their credit ratings are in jeopardy, which could threaten their ability to buy wholesale power and to provide uninterrupted electricity supply. They forecast even greater rate hikes in the next few years.
(Updated February 1, 2001)
|Source||John Ritter, "Regulators advise electric rate hikes," USA Today, January 4, 2001.|
Return to the Market
Failure, Regulation, and Public Choice Index
©1998-2002 South-Western. All Rights Reserved webmaster | DISCLAIMER