State Senate Passes Resolution on PG&E Bankruptcy Financing

By Published On: October 11, 2003

Up against the final hours of the 2003 legislative session, California lawmakers issued a resolution on September 12 asking state regulators to consider alternate means of financing Pacific Gas & Electric?s return to solvency. Senators accepted the measure, SR 30, by a 22-10 margin at about 11 pm last Friday. The resolution rose from the ashes of SB 772, a bill that would have required the California Public Utilities Commission to consider instituting a dedicated rate component backed by rate recovery bonds to help pay for PG&E?s bailout. The bill failed in an Assembly policy committee September 10. Though SR 30 does not carry the force of law, ratepayer advocates are hopeful that the move will catch the interest of CPUC members. The commission is still engaged in a proceeding to determine whether to approve a proposed settlement between CPUC staff and PG&E, which calls for the creation of a $2.2 billion regulatory asset. ?I think it helps in the sense that it shows there?s a lot of interest in exploring a better deal for PG&E,? said Mike Florio, The Utility Reform Network senior attorney. TURN sponsored SB 772 on the claim that a dedicated rate component could save PG&E ratepayers as much as $2.8 billion in bankruptcy-related costs. Florio said that during earlier phases of the CPUC case, the idea of recovering PG&E financing costs through rates was thought to be unacceptable to lawmakers. ?What we see now is that the only reason they didn?t vote for it is that PG&E went all out to stop it in the Assembly,? he said. ?Otherwise it would have sailed through.? Capitol insiders claimed that PG&E lobbyists mounted an aggressive push to defeat SR 30 once the resolution?s language got into circulation in Sacramento. But that interpretation is not shared by PG&E consultant Kent Kauss. ?We were in the halls and we spoke to a few members, but I wouldn?t say we were working that hard,? he said. Chief among the utility?s concerns were the figures used in the resolution, which concluded that the settlement as proposed would cost PG&E ratepayers ?more than an additional $5 billion,? and that plans such as TURN?s suggest that utility customers could save ?over $2 billion.? According to Kauss, these amounts are still under debate at the CPUC and should not be viewed as unassailable calculations. The notion that PG&E applied minimal pressure to lawmakers about SR 30 drew laughter from Florio, as well as the free use of an expletive concerning the business end of a steer. ?Senator [Joe] Dunn [D-Garden Grove] stood on the floor of the Senate and remarked that for a bankrupt utility, PG&E sure could afford to pay every lobbyist in town,? he recalled. Florio added that ?PG&E is desperate? to pass the settlement as-is ?and all they have to fall back on is political muscle.? State regulators are certain to institute a bankruptcy-related ?exit fee? for customers who choose to leave the PG&E system following resolution of a settlement payout, Florio said. In Southern California Edison service territory, direct-access customers are committed to approximately 13 percent of the utility?s total $3.6 billion bailout, he said?approximately $473 million after a $20 million subtraction for costs already paid by departing direct-access clients. The 13 percent figure matches the percentage of load that direct access accounts for in Edison?s service area. PG&E opposes a dedicated rate component in part because of potential delays in wrapping up a settlement, which it says will enable it to blot the red ink from its books. However, adoption of the current accord with CPUC staff provides no guarantee of swift execution. The decision eventually reached by regulators will be integral to determinations made in the utility?s pending case in federal bankruptcy court, and CPUC dictates may be subject to rehearing and possible judicial review. One source said the current settlement is so unpopular with utility customers that it is sure to be fought at the appellate or Supreme Court level should the deal make it past the CPUC. The commission is scheduled to reach a decision in its PG&E bankruptcy settlement case by December 18 of this year.

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