Although there were reservations that the deal may be too sweet for the utility, California regulators Thursday set aside an administrative law judge’s proposed decision and approved a contested settlement giving Pacific Gas and Electric Co. a $213 million general rate increase for 2007 with provisions for $125 million annual boosts in the subsequent three-year period (2008-2010). The settlement was called “satisfactory, not great,” by Michael Peevey, president of the California Public Utilities Commission (CPUC). Two major consumer groups refused to buy into the deal.
The decision adopts a new annual revenue requirement for the San Francisco-based giant combination utility of nearly $4.927 billion. The increase this year represents an increase in revenue of 1.4%, with increases of 1% or less in each of the three subsequent years.
PG&E CEO Tom King said the CPUC approval allows the utility to “assure customers it is on firm footing to move ahead with one of the industry’s most robust plans for [added] investment in gas and electric infrastructure and other initiatives to improve our service.”
PG&E originally applied for a $395 million increase in general revenues, and the assigned administrative judge recommended that total be reduced below the settlement amount to $170 million in 2007, with the subsequent $125 million annual boosts for the three subsequent years. Consumer and agriculture interests advocated a much smaller increase ($20 million) or in some cases a decrease in overall revenues of $307 million. Ultimately, the utility and the CPUC’s independent consumer unit, the Division of Ratepayer Advocates (DRA), along with most of the other parties, agreed to the $213 million increase.
A key part of the approved settlement was pushing back the time for another general rate case to test year 2011 and adding a third so-called “attrition” year of 2010. The added 2007 revenues are broken down as $222 million for electric distribution operations, $21 million for natural gas utility services and a $30 million decrease in revenues collected for generation.
The assigned commissioner for the case, John Bohn, said the regulatory commission generally needs to support parties to cases that work out their differences in settlements, “particularly in highly complex cases such as this one.” Nevertheless, Peevey, while voting for the settlement, made the comment that “parts of the settlement are much too generous to the company.”
Bohn said under California law the CPUC is supposed to evaluate the settlement as a whole — not in pieces — according to three criteria: (1) reasonableness in light of the whole record in the case, (2) consistency with existing laws and (3) whether it is in the public interest. This settlement meets all three, he said, and his four colleagues agreed.
“This settlement, which includes most, but not all of the parties, satisfies this three-part test,” Bohn said.
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