California hikes electricity prices

Price hikes could encourage energy conservation

Californians are to see their electricity bills rise by 40% as the government takes drastic steps to end the state's power crisis.

The five members of the California Public Utilities Commission all voted to increase electricity bills to allow generators to better cover their costs.

The increase, effective immediately, should generate almost $5bn a year for the state's cash-strapped utilities - Pacific Gas and Electric (PG&E) and Southern California Edison.

California's shortage of power stems from deregulation of the state's energy market in 1996, which barred utilities from passing on higher prices for wholesale electricity to consumers.

The two utilities have since incurred massive debts, and are on the brink of bankruptcy.

Avoiding outages

The state, which has already suffered several blackouts and numerous "brownouts" since June, is battling to resolve its energy problems.

The new rates are based on an average 30% increase on top of a 10% temporary rise in place since January.

This would create a 40% rise in electricity costs paid by 24 million Californians who buy power from PG&E and SoCal Edison.

But the details of a reward programme for customers who conserve energy are still being worked out.

California power officials have warned that the state faces a severe electricity shortage this summer when the use of air conditioning soars.