Rates expected to soar, blackouts to proliferate

The San Francisco Chronicle

Your lights are still on.

Despite predictions that a bankruptcy filing by Pacific Gas and Electric Co. could plunge the state into darkness, service should remain unchanged for the utility’s 13 million customers.

That’s the good news.

But the bad news is that you may be paying even more for the privilege. And bankruptcy court can’t stop the tsunami of 34 days of rolling blackouts that the California Independent System Operator forecasts for this summer.

In filing for Chapter 11 protection, PG&E is counting on a federal bankruptcy judge to lend it a sympathetic shoulder and a helping hand in the form of higher utility rates to dig out of its mountain of $9 billion in debt.

The 40 percent rate increase enacted by the California Public Utilities Commission is still on track. And additional increases remain a definite possibility, although the PUC and the bankruptcy judge will have to thrash out who has ultimate jurisdiction.

Harvey Rosenfield, head of the Foundation for Taxpayers and Consumer Rights in Los Angeles, says he thinks the final increase could hit 100 percent.

“The innocent victims of deregulation, the ratepayers of this state, stand to lose billions. Who’s going to bail all of us out?” he said.

Consumers were equally pessimistic. “In the end, consumers will end up paying for all this power that’s been purchased, one way or another, either through PG&E rate increases or the state running a huge deficit and raising taxes,” said Patrick Lannon of Salinas.

And many viewed PG&E‘s action in the most cynical light.

“I started out as a PG&E fan for many years,” said Bob Asquith of Burlingame. “As this has unfolded, I’ve become very untrustful. It seems as though they’re trying to stick the public with as much as they can and pull a lot of resources out of California for their parent company.”

For businesses, the biggest issue remains staving off the threat of blackouts.

“At this moment, we are one month away from potential rolling blackouts like we’ve never experienced before,” said Sunne Wright McPeak, president of the Bay Area Economic Forum, which represents 275 major Bay Area companies, including PG&E (which has not paid its dues since last year, she said).

Blackouts “will have just an extraordinary impact on the Bay Area economy, California’s economy and ultimately the nation’s,” McPeak said. “The bankruptcy is not going to help matters.”

Some business groups seem resigned to higher rates, if they would guarantee more reliability in the electricity supply.

“We’ve known for a long time that the numbers did add up and that rates would have to rise in some fashion,” said Justin Bradley, energy director of the Silicon Valley Manufacturing Group. “It’s a regrettable necessity.”

Bankruptcy proceedings can drag on for years. But some observers said the situation might be resolved much more quickly. PG&E could still withdraw its petition if it gets a satisfactory bailout from the state.

PG&E is using bankruptcy filing “as a way to turn up the heat on the governor to push for as good a deal as possible,” said Michael Shames, head of the Utility Consumers Action Network.

That actually would be preferable to the alternative, he said.

“I don’t see how bankruptcy court benefits consumers at all. It takes a lot of the control over the state’s energy policy out of the hands of the state and into the hands of a bankruptcy judge whose almost-sole consideration is the welfare of the creditors.”

The “absolute horror show” outcome would be if PG&E went into Chapter 7, which could set in motion a bankruptcy auction, said Nettie Hoge, executive director of The Utility Reform Network.

“I could envision the bankruptcy judge could quite readily sell off some of the utility’s assets to those same kind folks who have been gouging Californians with the other assets they bought from PG&E,” Shames said.

On the upside, the open nature of bankruptcy proceedings makes them preferable to secret wheeling and dealing, consumer advocates said, pledging that they will fight to make ratepayers’ concerns heard in court.

“‘Consumers will have a seat at the table,” said Harry Snyder, senior advocate for Consumers Union in San Francisco.

Some consumers said they thought yesterday’s actions might move the crisis to a positive resolution.

“I don’t have any problem with (PG&E filing for bankruptcy),” said Bert Hill of San Francisco. “PG&E acted an awful lot like a government bureaucracy anyway but without the kind of oversight of elected officials that the state has. They were the worst of both worlds in management a control — a monopoly, but largely out of control of consumers. It could turn out to be a better thing that a judge determines how to handle it.”