Most consumer and business groups condemn the plan, saying it will create hardship on residents and force more businesses to leave the state. But officials from California's two largest utilities--Southern California Edison and Pacific Gas & Electric--complain that even a 40% rate-hike isn't enough to ensure that they won't eventually have to file for bankruptcy.

Loretta Lynch, president of California's rate-setting PUC, admits that the big increase will cost customers of SoCal Edison and PG&E about $4.8 billion a year. But the dramatic increase is needed, Lynch says, to help the utilities stave-off bankruptcy and force residential and commercial users alike to conserve more power.

Despite recent evidence that California's electricity users are taking steps to conserve power, Lynch justified the huge increase by saying today that the rate hike will force "Electricity hogs … to pay more for the electricity they use."

Lynch was appointed to her post by Democratic Governor Gray Davis, who vowed just two months ago not to bail out utility companies and stick consumers with higher bills. But Davis' stance has since softened, clearing the way for the Democratic-controlled Legislature to push for big rate hikes over the objections of many conservatives. The state won't bail out mom-and-pop stores that make bad business decisions, some Republicans say, so the same rules should apply to giant utilities.

Though rates will skyrocket under the plan approved today, some utility officials hint that the newly approved increase--42% for customers of Southern California Edison and 46% for customers of PG&E--isn't enough. In a two-hour hearing on Lynch's plan yesterday, PG&E attorney Chris Warner referred to it as "a step in the right direction."

Wall Street, however, seems to love the bailout plan. Shares of both Edison and PG&E jumped by more than 30% each on Monday, and climbed even higher on Tuesday.