Consumer groups divided on whether plan benefits ratepayers
The San Francisco Chronicle
State regulators announced an agreement Thursday with major creditors of Pacific Gas and Electric Co. that could keep the utility intact and under state regulation after bankruptcy.
One consumer advocate said, however, that the deal could be costly for customers by delaying a long-overdue reduction in PG&E‘s rates, among the nation’s highest.
Another consumer group disagreed and said the state’s proposal was much better than PG&E‘s own bankruptcy plan — even though the PUC is not seeking to recover more than $4 billion that the utility transferred to its parent company before filing for bankruptcy 16 months ago. State Attorney General Bill Lockyer has sued to undo the transfer.
The agreement between the state Public Utilities Commission and PG&E‘s official creditors’ committee comes 10 days after thousands of PG&E creditors finished voting on rival PG&E reorganization plans, one by the company and the other by the PUC. The votes have not yet been counted.
In a joint news conference, the state commission and the creditors’ committee said they would ask U.S. Bankruptcy Judge Dennis Montali to reopen the vote and let creditors consider a revised version of the PUC plan. The creditors’ committee, which had previously endorsed both competing plans, now wants creditors to voice a preference for the PUC proposal, an action that Montali would have to consider when deciding which plan to confirm.
The revisions include:
— A change in the $1.75 billion offering of new PG&E stock that the PUC is proposing to help repay $13 billion in utility debts. The offering, which had met a skeptical response in some financial circles and was derided by PG&E, will now consist of preferred rather than common stock, making it more attractive to investors who would have to be paid before other stockholders.
— A commitment by the PUC that the utility’s rates will fully cover the costs of new securities in the commission’s plan, as well as prudent operating costs.
PUC attorney Gary Cohen said the commitment was implied in the commission’s earlier plan, and should not hurt consumers. As the commission previously forecast, he told reporters, “rates should be able to come down shortly after PG&E comes out of bankruptcy” next year.
But Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights, said customers won’t see rate reductions for years under the PUC‘s plan.
“In order to protect its own turf, the PUC has violated the (California) Constitution and ordered ratepayers to pay $10 billion to cover the utility’s losses,” he said.
Rosenfield’s organization made much the same argument in a lawsuit in April that sought to derail the commission’s plan, contending that it illegally kept rates high to pay off the debts PG&E incurred to suppliers when power prices soared in mid-2000. The state Supreme Court rejected the suit last week without comment.
Another consumer advocate disagreed with Rosenfield. Bill Ahern, an energy analyst with Consumers Union, called the PUC‘s announcement “a very positive development” and said consumers would be much better off with the commission’s plan than with PG&E‘s.
Ahern faulted state regulators, however, for not challenging the utility’s pre-bankruptcy transfers to its parent company. Ahern said, “Even the PUC plan will cost the ratepayers billions.”
PG&E said it had not seen many details of the PUC‘s revised plan, but contended that the commission’s proposed revision “underscores the fact that its current plan is not feasible and cannot be confirmed.”
PG&E‘s reorganization plan would transfer its power plants and transmission system to new companies, under the control of market-oriented federal regulators rather than the PUC, and use the property as collateral for loans to repay creditors.
The PUC would keep the utility intact and pay creditors with a combination of new and refinanced debt, the new stock issue, a freeze on dividends and PG&E‘s cash reserves, which have been growing since power prices dropped below state-approved rates.
Chronicle staff writer Carol Emert contributed to this story.
E-mail Bob Egelko at [email protected].