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.

Lynch was appointed to her job by Democratic Governor Gray Davis, who promised just two months ago that the utilities wouldn't be bailed out by sticking 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.