The San Francisco Chronicle
PG&E Corp. reported yesterday stunning profit of $1.1 billion for 2001, as a huge increase in electricity rates and a drop in power purchasing costs reversed the fortunes of a company that sent its largest division to bankruptcy court less than one year ago.
The majority of PG&E‘s profit came from the utility subsidiary, Pacific Gas and Electric Co., which filed for Chapter 11 bankruptcy protection in April. Through the utility, the company has more than doubled the amount of cash on its balance sheet in the course of the past year to more than $5.4 billion — among the highest cash levels of any corporation in the United States.
Last year’s earnings tied for the second most profitable year in PG&E‘s history. The company earned $1.3 billion in 1995.
As a result of the profit from 2001, more than 6,000 employees will be entitled to share in $64 million in bonuses, nearly 30 percent higher than one year ago.
PG&E officials portrayed the results as evidence that their business is on the right track. “The corporation’s financial results for the full year 2001 show that the company’s fundamental operations performed solidly last year,” Chairman Robert D. Glynn Jr. said in a prepared statement.
Last year, the company earned $1.1 billion ($3.02 per share), compared with a loss of $3.4 billion ($9.29) for 2000. During the fourth quarter PG&E earned $529 million ($1.46), compared with a loss of $4.1 billion ($11.34) for the same period a year earlier.
But the dichotomy between its public posture in bankruptcy court and its financial results outraged some consumer advocates. They say the company has unfairly tried to change the rules of an electricity deregulation game that it created, and shifted the burden of its failed risks onto its captive customers.
“This is a company that’s allowing its subsidiary to languish in bankruptcy, waiting for the public to bail it out, while shareholders cash in,” said Doug Heller, a senior consumer advocate with the Foundation for Taxpayer and Consumer Rights. “The PG&E Corp. is proving itself to be one of the most greedy, arrogant companies in California.”
The company’s problems began in 2000, when the price it paid to buy power skyrocketed while it was barred from passing on those costs to customers. That “under collection” of costs eventually reached at least $6.5 billion, and the corporation placed its utility in bankruptcy in April of last year citing $9 billion in debts.
In January of last year, California began buying power on behalf of the utilities. Shortly afterward, state utility regulators passed what amounted to a 40 percent increase in electricity rates.
But beginning last summer, a confluence of greater supply, lower demand and tougher regulation brought prices back to normal levels, just as higher customer rates kicked in.
Since then, the company has tried in bankruptcy court to reorganize in a way that would contravene 37 state laws and as many as 200 rules and regulations. It would essentially free the utility from state oversight and, according to a financial analysis by the consumer advocacy group The Utility Reform Network, produce about $12 billion in additional profit for the company during the next 10 years. The proposal has received a chilly reception in court but has not been ruled out.
PG&E Corp.’s operating earnings were 19 percent higher in 2001 than in 2000, and the results for the utility mirrored that growth. Of the corporation’s $1.1 billion in profit, about $914 million came from its PG&E utility.
The results blew past the analyst estimates compiled by Thomson Financial/First Call. On a per-share basis, the company reported earnings of $3.02, nearly 13 percent higher than the $2.67 analysts expected.
Now, Assemblyman Fred Keeley, D-Boulder Creek, is calling for state regulators to lower electricity rates. It is unclear how that proposal will be received. The Public Utilities Commission, which once resisted any attempt by the utilities to pass the high power costs on to their customers, allowed Edison to do just that in October. It is making a similar proposal in PG&E‘s bankruptcy reorganization. The commission president, Loretta Lynch, had no comment on PG&E‘s earnings yesterday.