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Despite complaints from customers about rising electric bills, the California Public Utilities Commission voted 4 to 1 on Thursday to keep profits at Southern California Edison and the state’s other big investor-owned utilities at a level that consumer groups say has long been inflated.
The commission vote will slightly decrease the profit margins of Edison and three other big utilities beginning next year. Edison’s rate will fall to 10.03% from 10.3%.
Customers will see little impact in their bills from the decision. Because the utilities are continuing to spend more on wires and other infrastructure — capital costs that they earn profit on — that portion of customer bills is expected to continue to rise.
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The vote angered consumer groups that had detailed in filings and hearings at the commission how the utilities’ return on equity — which sets the profit rate that the companies’ shareholders receive — had long been too high.
Among those testifying on behalf of consumers was Mark Ellis, the former chief economist for Sempra, the parent company of San Diego Gas & Electric and Southern California Gas. Ellis estimated that the companies’ profit margin should be closer to 6%.
He argued in a filing that the California commission had for years authorized the utilities to earn an excessive return on equity, resulting in an “unnecessary and unearned wealth transfer” from customers to the companies.
Cutting the return on equity to a little more than 6% would give Edison, Pacific Gas & Electric, SDG&E and SoCalGas a fair return, Ellis said, while saving their customers $6.1 billion a year.
The four commissioners who voted to keep the return on equity at about 10% — the percentage varies slightly for each company — said they believed they had found a balance between the 11% or higher rate that the four utilities had requested and the affordability concerns of utility customers.
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