PG&E Utility Sues to Force DWR to Hold Hearings

Alleging there is evidence that its customers would be overcharged by more than $1.4 billion, Pacific Gas and Electric Co. filed a suit last Tuesday in a state Superior Court in Sacramento asking that the state's power-buying agency, the Department of Water Resources (DWR), be forced to hold a public hearing to determine if its estimated $13 billion in power purchases are accurate.

PG&E's utility, now operating in Chapter 11 federal bankruptcy court proceedings, said the hearing is needed to determine if the revenue amounts estimated are just and reasonable and should be charged to PG&E's and other private utilities' electric retail customers. It asked the court to require DWR to hold the hearing on the results so far of its revenue-setting authority under the emergency state law (AB 1X) that authorized it to buy wholesale bulk power supplies for the state's financially insolvent investor-owned utilities.

"There is evidence that DWR is attempting to overcharge electric customers in PG&E's service area by over $1.4 billion in 2001 and 2002 alone, but DWR is refusing to hold a hearing on whether its costs are reasonable and supportable," said Roger Peters, PG&E's utility senior vice president and general counsel. "DWR should not be given a blank check to pay for its high-priced power contracts."

The PG&E utility, Southern California Edison Co. and consumer groups have criticized DWR's filings so far as inadequate. Based on the information DWR has provided, PG&E's utility alleges the water agency's revenue requirement for 2001-02 is "padded" by more than $3 billion "due to overestimating the cost of spot power purchases and natural gas."

"DWR determined that its revenue requirement was just and reasonable without providing any type of prior notice and without conducting a full and complete public review of its costs or revenue requirement," the PG&E utility said in its filing Tuesday. The utility claimed that ultimately some $68 billion of potential costs to utility customers are at stake over the next 10 years under the long-term DWR power supply contracts.

PG&E's utility said DWR has "repeatedly refused" requests for additional information and public hearings, noting it is exempt from any review by the public or California Public Utilities Commission.

In the meantime, the CPUC Tuesday postponed until its Sept. 6 meeting consideration of the DWR rate agreement and revenue requirement issues, saying it simply needed more time to process all the comments the proposals have drawn. In addition, a planned state general revenue public bond sale, originally slated for the spring, will now most likely be pushed back again until late in the fall, particularly if PG&E and others challenge the DWR and/or CPUC in the courts.

An assured revenue stream for DWR to reimburse the state treasury for billions of dollars spent for electricity is needed before the bond offering can go forward. The CPUC needs to take a half-dozen actions for those revenue stream assurances to be in place in the form of a dedicated portion of the three private-sector electric utilities' retail rates.

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