Edison, which covers most of Southern California except the Los Angeles area, said the discount is intended to help some of its biggest customers -- manufacturing companies.

Business advocates say the utility is also responding to the expectation that companies may soon be allowed to purchase electricity directly from energy suppliers, restoring competition for the utilities that was frozen during the energy crisis.

"The utilities have felt threatened by direct access" to energy suppliers, said California Chamber of Commerce lobbyist Dominic Dimare. "Edison is using a market-based, instead of a legislative- based, mechanism to respond to the threat."

In Northern California, a Pacific Gas and Electric spokeswoman said PG&E plans to propose similar rate reductions for businesses before the PUC in June. PG&E covers most of California north of Bakersfield and excluding Sacramento.

Under Edison's proposal, businesses would have to file an affidavit with the utility claiming financial duress to get a five- year rate reduction. Edison said the discount would be 25 percent the first year, and 5 percent less for each of the following four years. The proposal would apply only to medium-sized commercial companies that use 200 kilowatts or more at any given time.

PUC Commissioner Loretta Lynch said the commission will have to look "very hard at the premise" behind Edison's proposal and expressed concern that small businesses and consumers would bear the costs of rate discounts to larger companies.

"We need to work together to bring rate breaks to everyone," Lynch said. "Not just to some of us."

Consumer advocates, like Bob Finkelstein, executive director of The Utility Reform Network, said that in giving discounts to major consumers of electricity, utilities run the risk of raising the amount consumers have to pay for energy.

Finkelstein added that consumers face a threat of rising energy costs if large industrial energy-users leave the utility system, as well.

When the state deregulated energy markets in the 1990s, it made it easier for companies to buy their electricity directly from power suppliers, bypassing large utilities like Southern California Edison and PG&E. In legislation responding to the energy crisis, the "direct access" to energy suppliers was frozen.

Two major bills have been introduced this year to restore competition -- or "direct access" -- among utilities and energy producers.

Ashley Snee, a spokeswoman for Gov. Arnold Schwarzenegger, said the governor "wants to reduce (energy) costs for all California ratepayers.

Business advocates said Edison's move to reduce its rates for businesses is a response to a growing call to take another look at deregulation of energy markets.

Jack Kyser, chief economist of the Los Angeles County Economic Development Corporation, said that "there are plenty of other locations that offer something for Southern California's manufacturing base."

In the last three years, California has lost more than 300,000 manufacturing jobs and is forecast to lose another 1.2 percent in 2004, according to March's University of California, Los Angeles, Anderson Forecast.

Edison officials said that they have lost industrial customers because Southern California, the state's biggest manufacturing base, was hit particularly hard by the economic downturn. In a filing with the PUC, Edison disclosed that it had a net loss of eight large industrial users in 2002. In the five years prior to 2002, the company gained an average of 51 manufacturing accounts annually.

Electricity in the capital region is provided by the Sacramento Municipal Utility District.

Diana Parker, manager of major accounts for SMUD, said the publicly owned utility "hasn't seen a loss in revenue because of a loss in our commercial customer base."

SMUD, Parker said, already has business rate reductions for large consumers of power.