Capitol Update: PG&E Bankruptcy Financing, Direct Access in Works

The California Legislature is still emerging from its mid-session hibernation, but early activity in the 2004 campaign indicates that energy remains on the minds of lawmakers. Perhaps foremost is a measure that would authorize Pacific Gas & Electric to finance its $2.2 billion bankruptcy tab from ratepayers?otherwise known as PG&E?s dedicated rate component (DRC). Regulators in late December approved the use of the rate component as part of the utility?s bankruptcy settlement, but the DRC can be employed only through supporting legislation. During a hearing of the Assembly Utilities and Commerce Committee January 12, California Public Utilities Commission president Mike Peevey said that bill language should be finalized by January 22, the date of the commission?s next business meeting. PG&E, the CPUC, and The Utility Reform Network are working on the content of the bill. Peevey added that the subject could find a home in SB 772, a measure introduced in 2003 by Senator Debra Bowen (D-Redondo Beach). SB 772 would have required regulators to consider alternative methods of financing PG&E?s bankruptcy, but the bill died in committee ( Energy Circuit , September 12, 2003). Capitol insiders say that though Bowen has not committed to making this vehicle available for the DRC issue, the matter of PG&E?s rate component is expected to move quickly through the legislative process. Last year?s clashes on direct access and other market issues are likely to resurface in the coming months. One measure that might become part of the debate could take shape from the remnants of AB 1203, a two-year bill that failed to win consideration by the January 16 deadline this week. The terse measure, authored by Assemblymember Ray Haynes (R-Murietta), calls for the Department of Water Resources to ?sell or liquidate all power contracts? now held by the agency. Although DWR spokesperson Oscar Hidalgo said ?There are not enough details to comment,? he added that it wasn?t ?realistic? to think the complicated process of liquidating state pacts could be achieved by a one-line piece of legislation. According to lobbyist Norm Plotkin, who represents bill sponsor Strategic Energy?a direct-access provider?the economy of language has a purpose. Setting specific terms on when and how the contracts should be sold would disadvantage the state, he said. Leaving those details to the state?s discretion improves its bargaining position. Still, since the bill?s purpose is to reopen the market to competition, Plotkin and Strategic Energy would prefer that contracts be transferred ?sooner rather than later,? he said. Plotkin charges that the costs of servicing the DWR pacts are bad for direct access and could be higher than necessary for ratepayers. He called the state?s cost models ?grossly overstated,? pointing to DWR?s $1 billion overestimation of revenue requirements last year as glaring evidence. ?If we sell the contracts, we quantify what the hit is to ratepayers,? Plotkin said. ?And we?ll avoid billion-dollar boondoggles over modeling.? He added that the bill fell off this week?s hearing schedule because Utilities and Commerce Committee staff assured him the measure could be taken up at a ?high-level? meeting later this month. Bill supporters are expected to meet privately with government lawyers responsible for administering the DWR contracts, Plotkin said. He hopes that this session will permit the energy pact?assignment drive to gather more support and generate more detail before landing in another bill. AB 1203 author Haynes did not return calls on the matter before press time. PG&E consultant Kent Kauss agreed that AB 1203, though expired, could lead to another measure regarding the soundness of the much-maligned DWR pacts. ?We think there?s a lot that can be cut in those contracts, even the ones that have already been renegotiated,? he said. Some Capitol sources said the bill raises too many questions, such as the impact that could be wrought on the market if the contracts are transferred?as well as the difficulties involved in assigning the pacts. Others claimed that the measure is merely a gambit to restore direct access. The possibility of separating electric customers into ?core? and ?noncore? classes, such as those used in the natural gas business, is poised to receive the attention of legislators once again. Both the Schwarzenegger administration and lawmakers are interested in the matter, Kauss said, and staff of lawmakers in each house have been meeting to discuss it. The issue swirled around bills introduced last year by Senator Joe Dunn (D-Garden Grove) and Assemblymember Keith Richman (R-Northridge), each of which seeks significant changes to the electricity market. Sacramento watchers believe that yet another market bill, this one to be brought forward by Assembly speaker-elect Fabian N??ez, will address areas already contemplated by the Dunn and Richman measures, including cost responsibility surcharges and utilities? obligation to serve their customers. In other legislative news this week, AB 1684, a bill by Assemblymember Mark Leno (D-San Francisco) to extend incentives for distributed-generation supplies until 2008, passed with a unanimous vote before Reyes?s Utilities and Commerce Committee. AB 1684 next goes to the Assembly Appropriations Committee.

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Capitol Update: PG&E Bankruptcy Financing, Direct Access in Works

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