PUC Documents Show that Parent Companies, Not Public Must Pay for Utilities’ Problems

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Creation of Edison Int’l, PG&E Corp. Came With Ratepayer Protection Conditions

Edison International and PG&E Corporation are not allowed to deplete the assets of their utility subsidiaries, according to documents released Wednesday by the Assembly Electrical Energy Oversight Committee. Nor are the parent corporations allowed to let the utilities go bankrupt or fail to serve ratepayers. Consumer advocates say that these documents should be the nail in the coffin of any type of utility bailout.

“The companies were not given the right to form parent corporations so they could plunder the utilities and make out like bandits,” said Doug Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights (FTCR). “There were very specific conditions that Edison and PG&E had to agree to before any parent was created. Now Governor Davis must enforce those conditions.”

Official California Public Utility Commission (PUC) decisions state that it is the first priority of Edison and PG&E to ensure that their utility subsidiaries (SoCal Edison and Pacific Gas and Electric) can fulfill their obligation to serve customers. The documents are from the PUC decisions that created the Edison and PG&E parent corporations in 1988 and 1996, respectively.

According to the Edison decision (PUC Order #88-01-063, condition 12):

“The capital requirements of the utility, as determined to be necessary to meet its obligation to serve, shall be given first priority by the Board of Directors of Edison‘s parent holding company and Edison.” The same rule applies to PG&E. (PUC Order #96-11-017)

In crafting the decisions, the rules were written to protect consumers if the utility faltered while the holding company prospered. The document illustrates that the PUC anticipated a situation in which the utilities were in financial danger because the parent corporations had siphoned off money and talent for unregulated purposes. The PUC decisions’ conditions were written to protect against that situation, and to prevent a ratepayer bailout in a circumstance such as the current California energy crisis.

“When the PUC agreed to the formation of the parent corporations, they took steps to protect the ratepayers from mismanagement and greed. The PUC decisions make it very clear that if the utility companies ever had financial or managerial problems, the parent companies would be the first to step in. The parent companies have a legal obligation to bail themselves out. The public should not shell out a dime so long as the parent corporations still have money and assets,” said Heller.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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