By Brandon Bailey and Mark Gladstone
Mercury News

Meanwhile, one of the nation's major energy trading firms, the Oklahoma-based Williams Cos, announced that its fourth-quarter earnings will be much higher than expected, in large part because of profits from selling electricity on California's wholesale market.

Skyrocketing wholesale costs have driven the state's power industry to what many consider a crisis point. The state's two largest utilities, Pacific Gas & Electric and Southern California Edison, say they must be allowed to raise consumer rates to cover $8 billion in debts they have accumulated this year because wholesale costs are higher than the retail prices they have been allowed to charge during the transition to a de-regulated market.

Retail prices have been frozen since 1998, when wholesale costs were low, to let utilities collect extra revenue to pay off investments that were expected to become un-profitable in a de-regulated market.

Now that wholesale prices have risen, consumer advocates argue that utilities should bear the burden of a de-regulation plan that the power companies helped to negotiate.

Consumer advocates contend the utilities' parent companies are in strong financial condition - in part because they have collected more than $16 billion to pay off those un-profitable investments during their first two years of operating under de-regulation.

The PUC voted last week to order an investigation into the utility companies' finances, but it's unclear whether the results would be disclosed at this week's commission hearings."

1. "Export of Electric Power from California to Mexico".

2. "Export of Natural Gas from California to Mexico".

3. "California Energy Officials Discontinue Price-Cap System, in a Surprise Move".