While California’s utility watchdog, The Utility Reform Network, called PG&E’s $800 million rate cut last week for electric utility customers “a long way from fair,” utility customers still will be looking their first rate cut since before the 2000-2001 electricity crisis.

PG&E’s utility, which is on the verge of breaking out of three years in Chapter 11 bankruptcy — the largest utility bankruptcy in U. S. history — hailed the fact that its average retail rate will drop from 13.9 cents/kWh to 12.78 cents/kWh Monday as part of the implementation of the utility’s Chapter 11 settlement reorganization with the state regulators and the bankruptcy court. TURN supported the settlement belatedly in return for the utility agreeing to seek legislation for a dedicated rate component to help shave another $1 billion off the long-term cost of the settlement.

On Thursday by the same 3-2 split vote approving the settlement late last year, the California Public Utilities Commission approved a $799 million rate decrease for most PG&E’s retail electric utility customers (small residential customers who stayed within 130% of baseline rates were not subject to the rate surcharge the past three years, and thus, are not getting any decrease).

The move follows up on the controversial bankruptcy settlement now being implemented by the utility despite legal appeals by two dissident regulators. Apropos of the strong emotions surrounding the settlement among the CPUC’s five appointed commissioners, it took two 3-2 votes to get the rate reduction approved at the regulatory panel’s regular bimonthly business meeting in San Francisco.

CPUC President Michael Peevey called the decrease “another step away from the energy crisis,” but TURN’s executive director said that although welcome, the rate drop “doesn’t come close to undoing the damage done to consumers by deregulation.”

The reductions still leave rates “inflated by the costs of the CPUC’s approval of the bankruptcy bailout,” said TURN’s Bob Finkelstein, noting that two commissioners dissented claiming larger decreases were possible due to PG&E’s excess “headroom” (difference between cost of power and retail charges for it) and recent refunds announced from a Williams Co. settlement.

Commissioner Carl Wood, who along with fellow Commissioner Loretta Lynch, has challenged the original Dec. 18 settlement decision in the courts, asked for a delay on the PG&E utility rate reduction, arguing there might be more to be added that would push the reduction closer to $1 billion. Peevey argued that even a delay of a few weeks would cost consumers up to $80 million in lost rate reductions.

According to the CPUC’s internal meeting procedures, any commissioner can delay an item, unless his/her request is overridden by a majority of the regulatory panel. That is what the CPUC resorted to Thursday, overriding Wood’s request on a 3-2 vote, prior to later approving the item by the same slim majority.

“I don’t think there is any reason the decision couldn’t have waited three more weeks,” said Wood, alleging the decision by the CPUC was “a bit misleading” in what is claims to do. Wood said that contrary to the settlement, the rate reduction does not include all of the decreases contemplated in the bankruptcy settlement. “This is primarily an interim implementation of PG&E general rate case requirements, and even this is not complete.”

Wood is concerned that the settlement and the rate reduction don’t go far enough in including so-called “headroom” (different between cost of power and revenues collected in retail rates for the power) in the rate decrease. There is at least $1 billion left on the table in PG&E that should go back to ratepayers, he argued. Peevey and his colleagues voting in the majority said those additional decreases will come later.

The CPUC said the revenue allocations in this rate drop are “interim,” until the full generation cost-of-service study and final allocation rules are determined in the pending PG&E utility general rate case, for which the utility has an all-parties settlement pending before the regulatory panel. In addition, the CPUC said “further rate decreases are anticipated” for PG&E’s utility.

With what he called “among the highest rates in the United States,” TURN’s Finkelstein said PG&E “has nothing to brag about.” He said PG&E Corp. CEO Robert Glynn six years ago promised rates in electric restructuring would continue to go down; instead they “skyrocketed” (in 2001), and he added, “so did Glynn’s bonuses, which last year reach $17 million.”

©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.