My five-year-old nephew faced a big dilemma one recent Christmas. He gazed greedily at several wrapped packages under the tree but looked with some skepticism at the nearby empty milk glass and the plate holding a few cookie crumbs. He had growing doubts about Saint Nick but quickly concluded that if he rejected the big man outright, it might jeopardize any gifts. If the old guy and his crew of reindeer were not make-believe, even calling their existence into question could lead to the same undesirable result?fewer goodies. Like most risk-averse kids, he did what any greedy five-year-old would do: he went along with the game and was visibly relieved when the jolly man in the red suit?or whoever?decided he had been far more nice than naughty. Pacific Gas & Electric, like my young nephew, was hungrily eyeing all those pricey packages under the settlement tree to make it investment-grade. It, too, hates risk. To maximize its chances of scoring big-time, PG&E hedged its bets after its reorganization plan at the federal bankruptcy court, which would chuck state regulation over much of its assets, was no longer under the Tannenbaum. That proposal became about as real as Santa after the Ninth Circuit Court of Appeals rejected PG&E?s claim that state laws interfering with the utility's post-bankruptcy recovery would be preempted. That left one big box beneath the tree?PG&E?s deal with the California Public Utilities Commission staff to settle the bankruptcy battle. It called for continued state regulation but guaranteed that ratepayers would pay off and amortize a $2.2 billion package made up of a type of air known as a "regulatory asset." But Santa works in strange and mysterious ways. With the Ninth Circuit decision, he gave consumer groups and some CPUC members enough fuel to wrap their own presents. Three commission members proposed redividing the cost of bailing out PG&E between its shareholders and ratepayers to varying degrees. A fourth commissioner, Susan Kennedy, then realized they didn't hear what she heard. So she asked two usual adversaries to be good because they knew who was coming to town. PG&E soon after agreed to a deal with, of all elves, The Utility Reform Network, to ensure that whoever slid down that long regulatory chimney this week would be convinced the utility has been nice. PG&E need not watch out because credit-rating agencies are saying it is good. And it need not pout because ratepayers will be guaranteeing that big pretend asset, as well as solid financing and interest rates. This pretty gift is in many ways like the other packages that were under PG&E?s tree: few know what exactly is inside, given the closed-door deal making. Those who tried shaking the new box to guess at its contents are still left to wonder just what is included in this new variation. The crux of the deal was wrapped up between TURN and PG&E over the phone on December 15. It would pay off the $2.2 billion phantom regulatory asset PG&E claims is needed to pay its unrecovered costs with earmarked ratepayer funds, a.k.a. a dedicated rate component (DRC). The projected savings will materialize only if legislators pass a bill authorizing the issuance of DRC?along the lines of the bond used to cover the 10 percent drop in rates under the 1996 deregulation law. A DRC is less expensive because it comes with a lower interest rate and lower taxes. However, any estimated ratepayer savings will shrink until law enabling the rate component is passed. What is also known is that the new deal will reward PG&E with most of what it wants. This includes letting it keep $4 billion in headroom collected from ratepayers since the energy crisis, as well as binding the CPUC and continuing the more utility-friendly federal bankruptcy court?s jurisdiction for the life of the deal. Although PG&E?s customers will foot the bill for this multibillion-dollar present, the prospect remains that ratepayers? still-hefty post-holiday bill will be reduced by more than $1 billion. The plan also prohibits PG&E from paying its parent company?s litigation fees?which few considered to be anything but fancy wrapping on an empty Christmas box because ratepayers would reap zilch in return. Many, including TURN, declined to partake in the holiday caroling given that the package remains off-key. ?It was a choice between losing our virginity or saving ratepayers more than $1 billion,? said Mike Florio, TURN senior attorney. Under the deal, PG&E consumers get saddled with nearly all of the utility?s crisis and bankruptcy costs though they have had virtually no say in the matter. As a result, some of Santa?s helpers lobbied to send the gift back to their boss?s workshop. Some municipalities and other consumer representatives urged the commission to put off its vote this week, noting that there was no detailed financial analysis of the plan and saying that the minuscule comment period?less than two days?was unfair. ?There is so much at stake and too little information,? wrote James Weil, attorney for Aglet Consumers Alliance. ?Everyone is tired of the lingering effects of the energy crisis,? wrote Merced Irrigation District attorney Dan Carroll. ?[N]evertheless there is no extant crisis for PG&E,? he added. Detractors also note that legislative approval of the dedicated rate component is not a sure thing. ?The claimed benefits are illusory,? stated Palo Alto attorney Susie Berlin in a December 17 filing to the CPUC. The deal ?is riddled with conditions and caveats that make the likelihood of DRC financing highly unlikely.? And some lawmakers consider the deal too rich for PG&E and too costly for ratepayers. Last September, Senator Debra Bowen (D-Redondo Beach) and TURN worked to get legislation passed that would allow regulators to approve the issuance of a rate component as a substitute for a regulatory asset to cover PG&E?s uncollected energy crisis costs. PG&E then turned up the heat on its lobbying efforts against the bill, frying away most legislative support. Having PG&E come back and embrace a DRC, not to replace a regulatory asset but to refinance it, doesn?t seem so nice for consumers. PG&E comes out ahead regardless of whether legislation is passed. In addition, using the DRC as a refinancing mechanism yields no immediate savings. And you can be sure that if the Legislature fails to pass a bill, PG&E won?t hesitate to claim that lawmakers have been naughty and kept the utility from reducing its bankruptcy tab by $1 billion. Another looming question is, if the DRC comes to fruition and PG&E gets the cash up front, won?t that mean that the deal is over? untying regulators? hands and ending the jurisdiction of the bankruptcy court? Or does the deal last nine years? The three voting commissioners said the deal lives for nine years even if PG&E gets the cash via a rate component, which is the heart of the agreement. Others, however, said it wasn?t so clear. ?We never talked about it,? Florio said. Another noted that it was a ?matter of interpretation.? There is much concern about keeping the bankruptcy court involved in the matter because that's where disputes over interpretations of the agreements would end up, dragging out questions over the unclear line between state and federal law. While the CPUC managed to meet its self-imposed deadline for making a decision, ratepayers won?t get any gifts soon. For several holiday seasons to come, just when the winter energy bills are being opened, they?ll be looking with skepticism at that empty milk glass and those crumbs on the plate.