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TURN Doubts CA Utility Financial Woes Exist

TURN Doubts CA Utility Financial Woes Exist

Utility watchdog group The Utility Reform Network (TURN) isn't quite convinced that California's two major utilities are hurting financially from this summer's wholesale power price spikes.

Nettie Hoge, TURN's executive director, said the utilities have been fabricating a picture of "financial ruination" that is not real if deregulation transition revenues are considered in the equation.

The group released a study at a San Francisco press conference yesterday claiming that utility transition charges could more than offset higher power costs. In a filing made Tuesday with California Public Utilities Commission (CPUC), it asked state regulators to agree with that assessment.

The CPUC already has called for a series of evidentiary hearings to determine how to deal with the issue. A decision from those proceedings is expected by the end of the year.

Meanwhile, the utilities have asked the CPUC for expedited handling of their so-called "under-collections" on an emergency basis. That isn't likely to happen, however. A statement on Tuesday by CPUC President Loretta Lynch indicates regulators will deal with the issue more carefully and slowly than the utilities wanted.

TURN's report alleges that Pacific Gas and Electric Co. and Southern California Edison Co. have collected a combined $18 billion in so-called "competition transition charge" (CTC) revenues, including several billion dollars from electricity sales from its nuclear and hydroelectric generating plants this summer.

Some of these funds could be used to make the two utilities whole for their almost $5 billion in power costs from May through September that exceeded retail rate recovery. Retail rates have been frozen since mid-1996 as part of the state's deregulation process.

PG&E and Edison are assessing how to deal with the revenue under-collections in soon-to-be-announced third quarter earnings.

CPUC's Lynch said the commission is examining financial data on each company so it can "evaluate claims to investors and the media that recent power purchase liabilities have undermined the financial integrity of California's utilities. The magnitude of these claims imposes a responsibility on regulators to evaluate the utilities' financial circumstances on behalf of utility customers and the state."

In the meantime, the CPUC is asking the utilities to help identify "initial steps" in changing the regulators' accounting provisions to provide some "interim relief." Lynch indicated that one step might be to apply some of the stranded cost funds recovered over the past three years by the utilities to the wholesale power cost under-collections. That is strongly opposed by the utilities, which argue that would be contrary to the provisions of the state's 1996 electric industry restructuring law.

Richard Nemec, Los Angeles

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