On Thursday, the California Public Utilities Commission unanimously approved a rate hike of 7 percent to 15 percent. Small businesses will see a 7 percent increase in their electricity rates, while residential customers will see a 9 percent increase. A 12 percent rate hike is scheduled for medium-sized businesses and a 15 percent increase will be applied to large industrial customers.

All in all, the rate hikes average to about a 10 percent overall increase for the 24 million Californians who will be affected, far below the 30 percent increase the utilities were asking for.

The current chaos in the state's electricity market started with the deregulation law which was passed in 1996. The law essentially lifted the price caps on wholesale energy prices and forced private utilities to sell their power plants. Rather than generating their own power and reselling it to consumers, the utilities are supposed to buy power from competing generators. The competition among the various competing generators was suppose to result in lower energy prices, but instead prices have skyrocketed.

Because the utilities' retail rates have been capped at 1996 levels until March 2002, the utilities are unable to raise their prices to help offset rising costs. As a result of increasing costs, the companies have asked for increases of up to 30 percent. Their hopes are that the increases would allow them to stay in business and keep buying electricity.

If the utility companies are unable to generate more income, Californians may witness a series of widespread rolling blackouts across the state.

Some even warn that Pacific Gas and Electric Co. and Southern California Edison are on the edge of bankruptcy. It's estimated that the companies will run out of cash in three weeks if no remedy is taken. The likelihood of a bankruptcy has even prompted Southern California Edison to lay off 1,450 people or about 13 percent of its workforce. It has even warned that it could file for bankruptcy within weeks.

One possible solution is to regulate the prices electricity generators can charge for wholesale power, but the Federal Energy Regulatory Commission has refused to take such a step.

Another solution is a state bailout of the private utilities. Bonds would be issued by the state and be repaid through a long-term surcharge to customers' monthly electric bills. Pacific Gas and Electric and Southern California Edison are urging Governor Gray Davis and California law makers to issue the state bonds to help pay off the $11 billion they've spent so far on buying power.

Not all Californians, however, will be impacted by the rate increases. Residents of Los Angeles, Riverside, Azusa, Anaheim, Glendale, Pasadena, Burbank, and Sacramento, among others, will not face any increases in their current electric rates because they have municipal utilities which did not participate in the deregulation and selling off of power generators.