Lawmakers-turned-spin-doctors went into overdrive moments after the state Public Utilities Commission on Tuesday approved a rate hike of 42% for some customers of Southern California Edison and an even steeper 46% increase for those served by Pacific Gas & Electric. The increases will effect 26 million residential and commercial utility users.

Though some legislators and business groups loudly protested any proposed rate increases just a few weeks ago, their tune has changed since the PUC took action barely 48 hours ago. Now, many are claiming that the double-digit rate hikes will actually be good for the state's economy by forcing electricity users to conserve, thus avoiding mandatory blackouts as the weather gets warmer.

Even the California Chamber of Commerce has been forced to alter its once-adamant stance against big rate increases. The increases announced Tuesday are "probably necessary to help keep the lights on," Chamber president Allan Zaremberg says in a new letter to the group's members. "Only by bringing supply and demand into balance will California be able to prevent blackouts," he adds, noting that a steady supply of power is vital to keep the state's businesses running smoothly.

A few politicians have even likened the PUC's rate hike to the interest-rate hikes initiated by the Federal Reserve when the Fed wants to keep the economy from overheating. Higher electricity rates, they're arguing now, could prolong the state's long expansion if larger utility bills prevent businesses from building too many new plants or opening new offices too quickly.

Not everyone is buying those arguments, and Tuesday's approval of the rate increases--the largest in history--has already fueled poaching attempts by some other states. Yesterday, economic-development officials from both Michigan and Nevada began airing radio advertisements across California that are aimed at luring businesses away from the Golden State with promises of cheap and dependable power.

Officials in yet another state recently finished mailing more than 1,000 flashlights to California business executives. "The lights are always on in Tennessee," the mailer says.

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With Rate Hikes Certain, the 'Spin' Begins

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