Debate begins over who will pay PG&E’s $4.6 billion power bill

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Contra Costa Times

WALNUT CREEK, Calif._There’s an unpaid electricity bill of $4.6 billion in Pacific Gas & Electric’s San Francisco headquarters.

Now the debate begins on who is going to pay it.

PG&E says its 4.6 million customers in Northern and Central California will have to pony up. The company has even laid out a plan that calls for a 10 percent rate increase to start chipping away at that mountainous deficit.

But is the bill really that big, or is the utility simply complaining about its losses while hiding profits so that it can squeeze its customers and the public?

Consumer advocates say shareholders, and not the utility’s customers, should pay PG&E‘s bill. There is also discussion that taxpayers or the companies that generate and market electricity should share the pain.

Questions about who is going to pay for the skyrocketing price of electricity took on added urgency this week, when the credit ratings for PG&E and Southern California Edison, two of California’s three largest electric utilities, were downgraded for the second time in four months and government officials and financial analysts publicly questioned the utilities’ viability.

The prospect that the utilities could fall into bankruptcy because of the high wholesale price of electricity and the utilities’ inability to pass those costs on to consumers has been raised.

“They are saying that’s a near-term possibility,” said Laura Krannawitter, an advisor to Public Utilities Commissioner Henry Duque. “That certainly gets our attention.”

Critics say the utilities are exaggerating their problems.

“This is a game of chicken in which the utilities are threatening bankruptcy if the governor doesn’t force ratepayers to bail the utilities out,” said Doug Heller, a spokesman for The Foundation for Taxpayers and Consumer Rights, a Santa Monica-based organization that has floated the idea of a ballot initiative to re-regulate the electricity industry.

Heller said the utilities and their parent companies have made enough money to cover losses over the past six months.

“The shareholders are responsible for this,” he said.

Next week, the PUC will consider a request by The Utility Reform Network to change accounting procedures that TURN says would cut PG&E‘s losses in half.

It is unclear what else the commission will take up at that time, but by adding the TURN item to its Thursday agenda, it has left the door open to begin looking at rate increases.

“It’s kind of laying the groundwork for (rate increases in a fully deregulated electricity market), which is coming on us sooner rather than later,” said PUC commissioner Carl Wood, who mentioned “the possible bankruptcy of the big utilities” as one reason for the PUC to look at rate hikes.

Last month, PG&E filed what it calls a “rate stabilization plan” that would increase electricity bills by about 10 percent in January and leaves the door open for further rate increases in a year.

But that plan was rejected on procedural grounds by PUC board president Loretta Lynch, whose action was given by analysts as one reason for downgrading PG&E‘s credit this week.

Now, although the specifics of the PG&E plan are technically off the table, the PUC will begin looking at rate increases, including those proposed by PG&E, according to Wood and Krannawitter.

Lynch would not comment specifically about who should pay for the utilities’ bills or on the PG&E plan, except to say that, procedurally, the PG&E plan is off the table.

“There’s a whole slew of issues we’re going to be dealing with very quickly,” said Krannawitter. “(The PG&E plan) is one of them.”

When electricity deregulation began taking effect in 1998, PG&E was given a cap on energy costs it could pass on to consumers of 5.5 cents per kilowatt-hour. Throughout 1999 and the first half of this year, that was OK because the company was paying around 3 cents or 4 cents for every kilowatt-hour it purchased.

Then in May the wholesale price jumped to 16 cents, where it hovered until last month. It jumped again to nearly 28 cents over the past four weeks.

PG&E cannot_and its creditors will not_finance this shortfall very much longer,” the company said in papers connected with its rate hike plan filed last month.

The plan would raise the average residential electricity bill from about $54.52 per month to about $63.59. PG&E says that without its plan, bills will go even higher_to about $78 per month_once the retail rate freeze is lifted.

But consumer advocates note that at the same time utilities are paying high wholesale prices for electricity, they are also selling electricity at those same prices from the handful of power plants they have not sold. (Deregulation law calls on the utilities to sell their power generating assets.)

TURN wants the profits from those sales to offset the losses.

“They’re only showing us one side of the ledger,” said TURN director Nettie Hoge.

But PG&E says that the state’s deregulation law requires that any money it makes from its power plants that is above a fixed, allowable profit, must go into a pot of money controlled by the PUC that will eventually go back to ratepayers.

Ironically, the more money that goes into that pot, the sooner the rate freeze that today is protecting consumers is lifted.

But PG&E spokesman Jon Tremayne said that by the utility’s accounting, the rate freeze actually ended last summer. Ratepayers, as a result, are liable for billions of dollars of electricity that has already been used.

“Those conditions exist that the rate freeze ended way back when,” he said.

One Walnut Creek resident said that reality is going to strike hard when the bill comes due.

“That’s going to really get people,” said Jim Harwood, a Walnut Creek retiree who said the state should consider re-regulating electricity. “I’m in a unique position. I’m retired, so I could move. But the guy who’s working, they’re stuck.”

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