Utility rate refund will be long in coming, if at all. (Politics).

CALIFORNIA'S electric utility ratepayers have paid $1 billion too much in higher electricity rates over the past two years and are due for a full refund - at least according to California Public Utilities Commission member and former CPUC president Loretta Lynch.

But that money is now sitting in a reserve account with the state Department of Water Resources and a battle is brewing over just how much of it should go back to Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric ratepayers.

The DWR says some of the money will likely have to remain in reserve; in any case, it will be months, if ever, before ratepayers see a dime.

The problem stems from the bonds that the state sold late last year to repay the state for buying power on behalf of the utilities at the height of the energy crisis. In making its pitch to Wall Street, the state needed to satisfy the bond rating agencies and keep a $1 billion reserve account in case the transfer of power purchasing authority from the state back to the utilities didn't go off according to plan.

The DWR set up the reserve and was rewarded with low interest rates on the multibillion-dollar bond sale. The transfer of power buying authority went back to the utilities last month without a hitch.

So now, Lynch says, the state should refund that money.

"The state is not in the power buying business any more, so there is no need for that billion dollar reserve. They should give that money back to the ratepayers forthwith," she said. "And if they don't, I'm going to file a lawsuit on behalf of the ratepayers forcing them to do so."

But nothing is simple in Sacramento, especially when it comes to unraveling the power crisis. DWR spokesman Oscar Hidalgo said the agency would like nothing better than to return the money, but doing so might jeopardize its rating on that bond and on the DWR's authority to float bonds for its own substantial power purchases.

"We are trying to keep rates as low as possible and are trying to lower that reserve account," Hidalgo said. "But we're looking at what the rating agencies will be comfortable with. They want reassurance that there will be no additional power crisis in 2003 or beyond."

Hidalgo said that, in all likelihood, the bond rating agencies would require that a portion of the $1 billion would have to be kept in reserve.

Even if the bond rating agencies agree not to penalize the DWR for returning half that $1 billion to ratepayers, it will be up to the PUC to determine how that $500 million in rate rebates should be allocated. That process would take months.

"Thankfully, that's a decision we don't have to make," Hidalgo said.

Staff reporter Howard Fine can be reached by phone at [phone], ext. 227, or by e-mail at [e-mail].