Let debt-ridden utilities go bankrupt, says Nader

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PG&E aide labels idea irresponsible

San Diego Union-Tribune

SAN FRANCISCO — Consumer activist Ralph Nader stepped into the battle over California’s failed electrical deregulation yesterday, urging the state to allow Pacific Gas & Electric and Southern California Edison to go bankrupt.

Nader said court appointees would trim waste, the value of the utilities would drop, and the state could then purchase the “modestly priced” utilities and create a publicly owned power system.

“Electricity is an absolute necessity,” said Nader, who warned California in 1996 about the dangers of deregulation. “It’s a life-and-death matter and cannot be subjected to a deregulated environment of Wild West buccaneers speculating by the hour and then saying that innocent consumers and small businesses should pay for their greed.”

Nader held an informal news conference outside the building where a state regulatory agency is being told that the two utilities, which have a combined debt of nearly $12 billion, must be allowed to raise rates to continue buying power and avoid bankruptcy.

“The suggestion that having California utilities go bankrupt is a good thing is not only irresponsible, it’s dangerous,” said Ron Low, a PG&E spokesman.

Low said bankruptcy would not solve the problem of “price gouging” by out-of-state power providers, who have been charging far more than the price of producing power. He said the state would have to spend “hundreds of millions of dollars or even billions” each month to buy power.

In addition, he said, preserving the financial stability of the utilities is important because they can “act like a bank” and allow customers to spread the payment of high power costs over a long period of time.

The state Public Utilities Commission, which may authorize a rate increase for the two utilities at a meeting Jan. 4, heard legal arguments yesterday during a second day of hearings on a rate request.

Commissioner Carl Wood said he has looked at analyses of the potential impact of bankruptcy prepared by the utilities and the commission staff.

“Just on the face of it there would obviously be some very serious repercussions from an insolvency of a major California corporation,” Wood told reporters.

“I think that it’s something that if we can avoid it, then we should probably try to do that,” said Wood. “I don’t want to take the position that we have prejudged any issue in this case. I certainly haven’t myself.”

Gov. Gray Davis spoke by telephone yesterday with representatives of utilities and consumer groups who gathered in the governor’s San Francisco office. The consumer groups described it as an airing of positions or a “joint interview,” not negotiations over a rate increase. Some of those positions collided with the views of utility companies, however.

“There are tons of consumer issues that have to be on the table,” said Lenny Goldberg, a lobbyist for the United Consumer Action Network of San Diego.

Consumer groups were united in opposing any increase in electric rates and state bailouts unless they are accompanied by concessions from utility companies, including possible ownership stakes.

But utility executives refused any concessions and said they were entitled under deregulation law to compensation related to the rising cost of procuring power, according to spokesmen for consumer groups.

“The utilities do not feel they are required to give anything in return for the $8 billion to $10 billion they want,” said Harry Snyder, senior advocate for Consumers Union.

John Fielder, senior vice president of regulatory affairs for Southern California Edison, said through a spokesman only that the meeting was a “good, frank exchange of ideas.”

Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights, who attended the session, said utility bankruptcies were not necessarily the worst outcome for consumers.

“Bankruptcies could well end up being cheaper than utility bailouts,” said Rosenfield. “All their previous debts are washed out or renegotiated.”

He added that utilities operating under bankruptcy court supervision might take some pressure off the power markets and help bring prices down.

The state’s utilities are running up massive debts because their rates are frozen and they cannot bill customers for the soaring wholesale cost of electricity.

Consumer groups are urging the regulators to consider profits made by the utilities when their rates were frozen at an artificially high rate during the early years of deregulation to pay off long-term debt on nuclear power plants and other investments.

The consumer groups oppose any rate increase and are threatening to file a lawsuit if the commission allows one, contending that the emergency hearings violate requirements that rate proposals be given adequate time for public review.

One of the most emotional moments in the hearing yesterday came when Dorothy Diez, a retired receptionist and fourth-generation San Franciscan, urged the regulators not to approve a 26 percent rate increase sought by PG&E.

“Please, please don’t raise the rates,” said Diez, who said her bill is $90 a month. “My God, if they add another 26 percent I’ll hardly be able to eat.”

The hearings, which will continue today and next week, have provided a preview of some issues that may be considered by the Legislature when it returns to Sacramento next month.

The chairwoman of the Senate Energy Committee, Debra Bowen, D-Marina del Rey, urged the commission to consider lower rates for low-income people and to encourage conservation by imposing higher rates for higher amounts of energy use.

Assemblyman Fred Keeley, D-Boulder Creek, said the state can save PG&E and Edison from bankruptcy by purchasing their hydroelectric power plants.

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