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PG&E to Downsize, Promote Anti-Takeover Measure

San Francisco-based Pacific Gas and Electric Co. (PG&E) senior management said last Thursday the utility expects about a 2% workforce reduction from ongoing efficiency programs. Externally the utility is considering whether to sponsor a California ballot initiative next June to make municipalization efforts more difficult to complete.

PG&E officials talked about the efforts during a conference call with financial analysts last week. The company announced third quarter net income of $318 million (83 cents/share) compared with $304 million (83 cents) for the same period last year.

Although threatened numerous times with municipalization efforts in parts of its service territory, PG&E has had no successful takeovers by local governments of its private-sector system in recent decades, but fending off the efforts has taken a lot of time and money, according to CEO Peter Darbee.

The ballot initiative, which is still only a concept being discussed, has been labeled the "Taxpayer Right to Vote Act," according to Christopher Johns, PG&E's utility president. "It would require approval from two-thirds of the voters for local funding to be used to take over a private-sector utility's assets.

"We believe that taxpayers should have a say before a local government spends millions of dollars getting into the power business," Johns said. "We have faced potential takeovers multiple times over the last several years and have had to spend significant resources to oppose these efforts."

According to Darbee and Johns, the ballot measure could significantly reduce the need for local taxpayers and utilities to spend millions of dollars opposing these measures.

"If government wants to raise taxes now, it requires a two-thirds vote, but if government is to use taxpayer money to take over private enterprises, there ought to first be a vote of the people, and second it should be a reasonably high hurdle," such as the two-thirds vote, Darbee said.

In terms of the downsizing from new operating efficiencies and a drop in new business due to the slow economy, PG&E expects up to $30 million in efficiency saving next year as the result of a severance program it is offering employees. "For some time, we have been looking at ways to reduce lower-priority work and find efficiencies in our processes. The reduction we expect is in the $30 million range," said utility CFO Kent Harvey.

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