CPUC Nixes Anti-competitive Deal With Municipal
The California Public Utilities Commission has squashed a deal
between Pacific Gas and Electric and a north-central valley
municipal utility for being anticompetitive. A PG&E spokesperson
said the large utility was both "surprised and disappointed" by the
3-2 negative vote, indicating his company would resume negotiations
to work out a deal acceptable to the state regulators.
The PG&E utility had agreed to sell Modesto Irrigation
District (MID) part of its electric distribution system serving
23,000 customers in four rural towns in Modesto County for $89.8
million, but the CPUC reacted negatively to three portions of the
accompanying service area agreement that include a 25-year
The three aspects in the deal that drew CPUC criticism are:
PG&E utility customers outside of MID's expanded territory
would have no chance to benefit from electric distribution
competition for at least five years because of the MID agreement.
PG&E utility customers who would become MID customers could
no longer choose between MID and PG&E for electric distribution
service. The same customers would have to wait until as late as
2002 to have their choice of power providers because MID, as a
government-run utility, is not required by California's electric
restructuring law to provide its customers with direct access if
they want it.
Another part of the agreement would have required MID to pay
PG&E an additional $54 million to cover the competition
transition charges (CTC) the investor-owned utility would have
recovered from the customers switching to the government utility.
Also, up to half the savings PG&E realized from the deal would
have to be refunded to its utility customers. However, the CPUC did
not rule on these parts of the deal because of the rejection based
on its anti-competitive aspects.
In recent years, MID has competed aggressively with PG&E for
customers as one of the state's larger government-run electric
operations. PG&E earlier sought state legislation and civil
court actions to bar MID's efforts before the two utilities in 1996
began negotiating a settlement.
As a special district, MID holds a different status than
municipal utilities run by charter cities. It has powers of
condemnation and authority to acquire and operate electric plants
as well as sell power to cities, public utility districts and
individuals. MID currently serves 90,000 customers in central
California. Richard Nemec, Los Angeles
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