Utility watchdog group The Utility Reform Network (TURN) isn’tquite convinced that California’s two major utilities are hurtingfinancially from this summer’s wholesale power price spikes.

Nettie Hoge, TURN’s executive director, said the utilities havebeen fabricating a picture of “financial ruination” that is notreal if deregulation transition revenues are considered in theequation.

The group released a study at a San Francisco press conferenceyesterday claiming that utility transition charges could more thanoffset higher power costs. In a filing made Tuesday with CaliforniaPublic Utilities Commission (CPUC), it asked state regulators toagree with that assessment.

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

Meanwhile, the utilities have asked the CPUC for expeditedhandling of their so-called “under-collections” on an emergencybasis. That isn’t likely to happen, however. A statement on Tuesdayby CPUC President Loretta Lynch indicates regulators will deal withthe issue more carefully and slowly than the utilities wanted.

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

Some of these funds could be used to make the two utilitieswhole for their almost $5 billion in power costs from May throughSeptember that exceeded retail rate recovery. Retail rates havebeen frozen since mid-1996 as part of the state’s deregulationprocess.

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

CPUC’s Lynch said the commission is examining financial data oneach company so it can “evaluate claims to investors and the mediathat recent power purchase liabilities have undermined thefinancial integrity of California’s utilities. The magnitude ofthese claims imposes a responsibility on regulators to evaluate theutilities’ financial circumstances on behalf of utility customersand the state.”

In the meantime, the CPUC is asking the utilities to helpidentify “initial steps” in changing the regulators’ accountingprovisions to provide some “interim relief.” Lynch indicated thatone step might be to apply some of the stranded cost fundsrecovered over the past three years by the utilities to thewholesale power cost under-collections. That is strongly opposed bythe utilities, which argue that would be contrary to the provisionsof the state’s 1996 electric industry restructuring law.

Richard Nemec, Los Angeles

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