The plan aimed to allow Pacific Gas & Electric to emerge from bankruptcy is illegal and wallops ratepayers with excessive costs, according to supporters of a petition for rehearing sent to the California Public Utilities Commission. The cities of Palo Alto and San Francisco, as well as consumer advocates, filed for rehearing January 20 claiming the December 18 deal, adopted on a 3-2 commission vote, is unjust and violates due process. They add that the commissioners violated their ratemaking authority and duty to balance utility and ratepayer interests. ?The decision discriminates against regulated utilities that chose not to declare bankruptcy for the advantage of their shareholders and to the detriment of ratepayers,? argues the joint brief filed by the city and county of San Francisco, the Office of Ratepayer Advocates, and the Aglet Consumer Alliance. In a separate brief, Palo Alto challenges the handcuffing of commissioners to the settlement for nine years. Other objections include that the final decision, partially the result of an 11th-hour deal reached between PG&E and The Utility Reform Network, is not backed by evidence in the record and impermissibly hands over CPUC jurisdiction to the federal bankruptcy court. ?The legally flawed and unduly restricted process that resulted in [the decision] did not provide for an adequate public review of the settlement or a reasoned analysis of the amount of money in fact required to achieve the Commission?s stated objectives,? claims San Francisco?s petition. The decision will cost utility ratepayers up to $8 billion over nearly a decade. It creates a $2.2 billion regulatory asset that will receive an 11.22 percent rate of return on the equity portion for nine years, which may be replaced by an earmarked revenue stream from rates that could reduce the tab by $1 billion. The bankruptcy court maintains jurisdiction over the reorganization plan for its life. Stakeholders that backed the deal also include large energy consumers, the Silicon Valley Manufacturers Group, business and agriculture, and the Federal Executive Agencies. PG&E has 15 days to file its response. Utility spokesperson Ron Low said many of the petitioners? claims were raised previously at the CPUC and bankruptcy court and were rejected. ?It appears these parties are continuing their effort to try and delay the resolution of our Chapter 11 case, and keeping? customers from reaping rate decreases. The same day, TURN took issue with another part of the commission?s bankruptcy decision; specifically, implementation of the rate-setting order now before the CPUC and PG&E?s interpretation of the underlying rate reduction settlement reached last week (see <i>Energy Circuit<\/i>, January 16, 2004). TURN, along with several other consumer groups, signed on to the deal lowering rates but maintains that the commission?s decision left unresolved ratemaking provisions, which the utility seeks to nail down in its proposed rate design settlement motion. In an advice letter, TURN balked at PG&E?s attempt to alter two accounting provisions under the reorganization deal. The ratepayer advocate objects to PG&E attempting to tap into an account dedicated to distribution functions to cover costs associated with the watershed enhancement corporation. That entity, the Environmental Enhancement Corp., will be responsible for carrying out protection of the utility?s 140,000 acres of lands around its extensive hydropower network. PG&E agreed to protect the areas in perpetuity. ?[T]he environmental enhancements have nothing to do with PG&E?s distribution system,? states TURN?s letter to the CPUC. TURN is also wary about another pitch by PG&E, which seeks to eliminate the Utility Retained Generation Income Tax Memorandum Account, and wants the commission to carefully consider the matter. ?Balancing accounts usually benefit the utility, but this one benefits customers. So, of course, they want to scrap it ASAP,? said Mike Florio, TURN senior attorney. In a January 20 motion seeking final approval of the settlement, PG&E claims the proposed revenue and rate-allocation deal pending at the CPUC is fair and reasonable. It urges the commission to cut the comment period by more than half, from seven to three days, making comments due by January 27. An expedited decision ?would avoid the cost and delay of time-consuming litigation over allocation and rate design issues relating to implementation of rate reductions that PG&E now estimates could be approximately $800 million,? according to the utility.