In an eleventh-hour move designed to fashion a three-vote majority on the stalemated California Public Utilities Commission, Pacific Gas and Electric Co. and a leading utility consumer group, TURN, late Monday filed a revised plan for bringing the utility out of Chapter 11 bankruptcy with an investment-grade credit rating.
The move is designed to assure that at least three of the five CPUC commissioners on Thursday will vote to end the utility’s nearly three-year-old bankruptcy.
The new deal conceivably could save PG&E retail electric utility customers about $1 billion over the life of the settlement and utility reorganization plan, which could be from five to nine years. An immediate retail rate reduction of $670 million is still embodied in the compromise proposal. The five CPUC members were scheduled to meet in closed session Tuesday to seek a compromise solution that a majority could support.
The federal bankruptcy judge in the PG&E utility case ruled last Friday that he is prepared to okay a utility-CPUC staff proposed settlement if the state regulators okay an acceptable solution this week when they meet in a regularly scheduled business session, whose agenda is full of major energy items.
In prepared statements, both the utility and consumer group appeared to grit their organizational teeth in making the joint filing. Long-time adversaries, the two recognized this was a political imperative given the six alternatives the CPUC was scheduled to vote on Thursday. They noted the modification should be to CPUC President Michael Peevey’s second alternative, which itself modified the proposed settlement to strengthen the environmental enhancements in the deal.
“TURN was between a rock and a hard place in having to decide whether to agree not to oppose a decision that would have the least possible cost to ratepayers or continue to fight what appeared to be a losing battle,” said Bob Finkelstein, TURN (The Utility Reform Network) executive director. “Unfortunately, we think lowering the costs for consumers and achieving an immediate rate reduction were the best we could hope for from this CPUC.”
The compromise draws on language offered in a alternate from Commissioner Geoffrey Brown, often the swing vote on 3-2 decisions that have become the hallmark for the CPUC this year when it comes to tough energy issues. In doing this, the utility and TURN seem to be pointing for Peevey, Brown and the only CPUC member not sponsoring an alternative, Susan Kennedy, to provide the three votes needed.
Like the Brown alternate, the regulatory asset would be paid down more quickly, but unlike it, the new compromise would allow for the so-called “regulatory asset” part of the settlement to be replaced with TURN’s proposed “dedicated rate component (DRC),” if state legislation can be enacted to permit it. Last week at a legislative committee hearing on the proposed PG&E-CPUC staff settlement, state Sen. Debra Bowen, energy committee chairperson, said she thought such a bill could be passed and signed by the governor rather quickly.
“The DRC could not adversely affect the PG&E utility’s investment grade credit ratings after emerging from Chapter 11, and PG&E would be permitted to rebalance its capital structure after receiving the proceeds of the securitization,” PG&E said in a prepared statement announcing the agreement with TURN.
“When (the utility) filed for voluntary bankruptcy (in April 2001), PG&E virtually assured itself of a bailout,” said TURN’s spokesperson in San Francisco. “The question of how much of a bailout was up to the CPUC, and the answer it came up with was much higher than it needed to be.”
Despite TURN’s and Bowen’s urging for the DRC alternative to be considered, the state regulators did not “have the resolve to do so,” according to TURN, so it was left with only two alternatives — (1) cut a deal with PG&E, or (2) risk having consumers pay more with one of the other alternatives.
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