The 2008 profit levels of California's three largest private-sector utilities were adjusted last Thursday by the California Public Utilities Commission (CPUC). One utility received an increase, one a decrease and the third stayed the same.

As usual the discussions were "contentious," according to CPUC member John Bohn, who said the regulators tried to narrow the differences among the utilities, all of which are enjoying sound financial standing six years removed from the energy crisis that forced one utility into Chapter 11 bankruptcy and a second to the brink of insolvency in 2001.

Bohn acknowledged that "not everyone is happy" with the final decision by the five-member panel. He said California these days is "asking a lot of the energy utilities" from reliability to global climate change to providing for the low-income sector of society.

"We're asking the utilities to transform the way that they do business," Bohn said. "They're being asked to provide support for largely new and untested technology at the same time they are being asked to replace aging infrastructure."

Bohn, a former head of Moody's Investors Service, called the current economic climate "some of the most uncertain times I have personally seen -- turmoil in the credit markets, high increases in foreclosure rates, and a national election that is among the most contentious I have ever seen."

For 2008, Southern California Edison Co. (SCE) is authorized a 11.50% return on equity (ROE), resulting in an 8.77% rate of return (ROR), after asking for an increase in its ROE to 11.80% from 11.60%. It will have a lower authorized profit level in the new year.

Pacific Gas and Electric Co. (PG&E) was given an 11.35% ROE, producing an 8.79% ROR, keeping the same profit level, after asking for an increase to 11.70% from 11.35%.

Sempra Energy's San Diego Gas and Electric Co. (SDG&E) got a boost in its ROE to 11.10%, with 8.40% for its ROR, after seeking an 11.60% ROE from its current 10.70% level.

Debt-equity levels remain strongly skewed to the equity side for all three: SCE 43% debt to 57% equity; SDG&E, 45.25%-54.75%; and PG&E, 46%-54%.

"The capital structures proposed by SCE, SDG&E and PG&E are balanced, attainable and are intended to maintain an investment-grade credit rating and to attract capital," the CPUC said.

CPUC President Michael Peevey said on balance he could support the new profit levels, but he is concerned that SCE has a small reduction in its ROE, and "in these contentious, uncertain times, I am not sure that is a very wise decision. Nonetheless, I will vote for the decision, which on balance is pretty reasonable."

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