California’s regulators, who supported a controversial PG&E bankruptcy settlement last year, cheered on state elected officials last week for producing a law that will allow the utility to continue with its final steps to full recovery.

They called the new law (SB 772) good for both PG&E’s electric utility customers and the state’s now-rebounded economy. “By signing SB 772, the governor saved PG&E customers approximately $1 billion and contributed to the state’s economic recovery post-energy crisis,” said Michael Peevey, president of the California Public Utilities Commission in a prepared statement, acknowledging that his regulatory panel worked closely with the utility consumer group TURN (The Utility Reform Network) and PG&E’s utility to get the bill passed.

“I am extremely gratified that the legislature and the governor saw the benefits to California of this important legislation,” he said, with his words being echoed by fellow majority commissioner, Susan Kennedy.

Gov. Arnold Schwarzenegger last Monday signed SB 772 into law, providing a final bailout for PG&E.’s emergence from Chapter 11 bankruptcy. His press office acknowledged the bill as one of two he signed but issued nothing further on the measure. The new law authorizes the utility to refinance $2.21 billion of its debt backed by a retail utility rate revenue stream.

The so-called “dedicated rate component” is estimated to lower the overall cost of the PG&E utility financial reorganization by about $1 billion or the next decade.

“Today marks yet another step away from the energy crisis and down the path toward economic recovery for PG&E, its customers, and the state,” said the CPUC’s Kennedy. “SB 772 was approved by the legislature in a bipartisan 33-0 vote and the governor’s signature will ensure that California stays on the right path.”

The PG&E utility’s CEO Gordon Smith said the governor’s action “brings us another step closer to being able to provide a significant savings opportunity for our electric customers — potentially up to $1 billion over the next 10 years.”

PG&E’s utility spokesperson Ron Low in San Francisco said the potential customer savings results from the lower financing and tax costs associated with the securitized dedicated rate component. Last December, PG&E’s utility agreed to adopt TURN’s proposal to use the dedicated component to refinance the regulatory asset, which was established as part of the CPUC-approved — but still controversial — bankruptcy reorganization settlement.

The utility outlined the steps following the governor signing:

PG&E’s Low said that assuming all of these conditions are met, the utility then has the option of using one or two phases (“tranches”) up to one year apart to complete the bond sale.

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