Bankruptcy-preoccupied Pacific Gas and Electric Co., has praised California’s power-buying agency, the Department of Water Resources (DWR), for finally recognizing the prospect of lower natural gas prices as a primary reason for lowering by 20% its overall estimated revenue needs through next year.

In a prepared statement, the PG&E utility said it’s “encouraged” by the DWR’s announcement last week because it “reflects the changing market conditions that have led to lower gas and electricity prices (in recent months).”

With a controversial Chapter 11 bankruptcy reorganization plan that moves all but its utility distribution operations out of state regulation, the PG&E utility is using the DWR move as further verification that its assumption of lower gas prices that will lead to future utility-produced electricity in the 5-cent/kW range.

“The market forces have changed (in the western states) and that has led to lower natural gas prices, which, in turn, has led to lower wholesale electricity prices,” said a San Francisco-based PG&E utility spokesperson. “That’s an important development.

“We’ve been forecasting and calculating lower prices in the gas side for a couple of months in looking at the forward curves. So, when DWR re-calculated some of those numbers, its overall revenue requirement dropped quite a bit.”

Long-term contracts are based on an average of five-cents/kWh, and that is based on using market benchmarks and taking into account contract prices, the PG&E spokesperson said. “So when we look at the overall wholesale picture, natural gas is an important factor, and you will continue to see that the five-cent (electricity) price we propose is a very good price.

(The statewide utility consumer watchdog group, TURN (The Utility Reform Network) proposed a utility five-cent fixed price contract last year.)

Regarding DWR power purchases, PG&E is still concerned about how the state agency’s revenue needs are divided between it and the two private-sector utilities in the southern half state. It wants “fair and balanced” distribution of those costs, rather than an earlier proposed spread that would impose more of the charges on PG&E customers.

“We look forward to working with the governor in his ongoing efforts to lower wholesale electricity prices and bring stability back to the market for our customers,” PG&E said in a prepared statement. “We hope this development (by DWR) will facilitate efforts (by the state Treasurer) to quickly and fully recover the state’s power purchase costs.”

©Copyright 2001 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.