Going through a divorce has its upside\u2014when it\u2019s over, that is. \tIn the interim, there are threats, lawyers, and unknown amounts of money involved. \tTwo utilities\u2014Pacific Gas & Electric and Southern California Edison\u2014complained about their possible California \u201cdivorces\u201d this month to the financial community. \tWith PG&E\u2019s San Bruno-related expenses and Edison\u2019s cost of the San Onofre Nuclear Generating Station shutdown, their executives said they feared the cost of borrowing money for new projects would increase as they go through the \u201calimony\u201d processes. They said they\u2019re going to ask the California Public Utilities Commission for a higher rate of return on investments to make it cheaper for them to borrow money and protect their shareholders. \tAccording to utility spokesperson Brian Hertzog, PG&E, in an \u201cextreme scenario\u201d could file for Chapter 11 bankruptcy. The utility is looking to raise up to $4 billion to cover the likely state penalty for the San Bruno natural gas explosion, and might not be able to raise the equity, he said. According to an Aug. 21 filing at the commission, PG&E estimates that its annual revenue requirement could rise by $800 million due to increases in its borrowing costs, (see sidebar on page 5). That \u201ccost\u201d to the utility, however, is an unverified claim. Even PG&E notes that in its document to the CPUC: \u201cUltimately, the ability to issue equity to fund fines and penalties and planned capital expenditures will depend on the reaction of investors, equity analysts and the rating agencies to the Commission\u2019s decision,\u201d it states. Edison ran an advertising campaign in Southern California newspapers to persuade ratepayers to support the utility in its efforts to raise its rates of return but provided no numbers. Here\u2019s the backstory: On Dec. 20, 2012, the commission decided to slightly lower the rates of return on equity for PG&E, Edison, SoCal Gas, and San Diego Gas & Electric to what is more in line with utilities across the country. * PG&E went from 11.35 percent to 10.4 percent; * SDG&E, from 11.1 percent to 10.3 percent; * SoCal Gas, from 10.82 percent to 10.1 percent; and * Edison, at 10.4 percent, down from 11.5 percent. The average rate of return on equity investments across the country for electric utilities is 10.36 percent. For gas utilities it\u2019s 9.75 percent. \tAll those numbers hark back to the 2000-01 energy crisis. \tIn response to record high electricity wholesale prices, PG&E filed for bankruptcy. \tJust before that, the utility transferred $5 billion to the parent company. When bankruptcy proceedings started, that money simply disappeared. The parent company was \u201cringfenced\u201d to avoid liability for both the utility and parent company (Current, Dec. 1, 2003). Regulators and politicians wanted the $5 billion restored to the utility, but it turned out that ratepayers would have to pay for the lost funds. \tThe state attempted to get the money back in court. But it was a lose-lose situation for ratepayers. \tEdison threatened bankruptcy at the same time. \tBoth utilities blamed the commission on their financial woes because it wasn\u2019t requiring ratepayers to pay high rates of return 2000-01, so they, in turn, could borrow money to buy wholesale electricity at the nascent California Independent System Operator and keep the lights on. \tThus, for the last decade, California utility shareholders have been authorized high rates of return to reestablish their financial credibility with bankers. Regulators and politicians fear more blackouts if utilities cannot borrow the funds required to keep generation and transmission working. \tBut it\u2019s a different state of regulation now in California. \tIt\u2019s a different Wall Street with its own lack of regulation. \tWhen the commission lowered the rate of return on capital, it did it wisely. The commission did not insist on a set system\u2014which may annoy lenders. Instead of setting a single rate, the commission added a trigger\u2014if ratings agencies, like Moody\u2019s, bond indexes change by 1 percent (100 basis points), utilities get a new review. \tThat\u2019s a good deal for utilities. They shouldn\u2019t be whining so much. \tMoody\u2019s in May, for instance, cited that strong California regulation is leading to \u201ccredit positive\u201d for PG&E, despite the proposed $2.25 billion penalty for the San Bruno explosion. The agency called the state an \u201cabove-average regulatory environment,\u201d for Edison in July. But, PG&E insists that the commission is not considering \u201chow important\u201d its San Bruno action is in \u201cendangering the company\u2019s financial health,\u201d said Hertzog. \tWhen I got divorced, there was no trigger mechanism, just relief\u2014despite the financial decline. I coped with it, and that\u2019s what utilities\u2019 shareholders should do. Shareholders are getting into something like a marriage. It may be love at first sight of the dividend, but passion wanes. It may be millions of dollars in higher cost of borrowing money the utilities believe to be threatened by state regulation, requirements, and fines, or it just may be posturing. At least I knew what was at stake in my divorce\u2014shareholders and ratepayers should too.