The Other PUC Battle
By Dennis Herrera
[Originally published by the San Francicso Bay Guardian, November 19, 2003]
When then acting mayor Chris Daly made two controversial appointments to the San Francisco Public Utilities Commission Oct. 22 while Mayor Willie Brown was traveling in Tibet, it marked the beginning of a media frenzy that has even now scarcely begun to subside.
Without question, the work of the SFPUC is critically important, with oversight of water, waste water, and municipal power services to the city and county of San Francisco. But sadly missing from much of the mainstream news coverage lately has been another battle looming before the statewide utility oversight panel, the California Public Utilities Commission. It's a fight that will ultimately determine the bailout plan under which Pacific Gas and Electric Co. will emerge from bankruptcy.
And the less that is known about it, the worse the outcome will be for consumers.
It should come as no surprise that PG&E has its own ideas about the kind of bankruptcy plan it would like to restructure under, and it's already forged a deal toward that end with the CPUC staff.
And what a sweetheart deal it is:
- Since announcing its proposed bailout plan, PG&E's market value has increased by more than one fifth.
- Utility analysts project that shareholder dividends will go up 30 percent under the settlement – higher than they ever were before deregulation.
- Wall Street is positively giddy over the deal, with a lavishly excessive revenue stream locked in from an entirely captive source: northern California consumers.
Indeed, the profits assured to PG&E under the company's proposed settlement will come exclusively from excessive electricity rates. California ratepayers – who already pay the highest rates in the continental United States – would be locked into those same rates over the next nine years. And with northern California energy consumers already paying substantially higher rates than those in southern California, the disparity would add further financial burdens to individuals and businesses already struggling to emerge from a persistently sluggish regional economy.
Fortunately, consumers still have a fighting chance. While PG&E agreed on a bailout plan with the CPUC staff (the CPUC's Energy Division, in particular), the scheme has yet to be approved by the five-member appointed commission.
Those CPUC commissioners now make up our court of last resort. Early on, the federal bankruptcy court decided its job was strictly to look out for the interests of creditors – not consumers. For its part, PG&E is looking out for itself. And so far it's doing a fine job, spending hundreds of millions for lawyers and experts in pursuing its case.
Since taking office as city attorney in January 2002, I've worked closely with the Utility Reform Network (TURN) and other consumer representatives to promote the interests of customers in PG&E's bankruptcy. This has resulted in a plan to modify the bailout.
Under the modified plan, the cost of the bailout would be paid by ratepayers through a "dedicated rate component," with the $2.2 billion price tag financed through a separate entity entitled to more favorable interest rates. It would bring tax advantages for ratepayers and eliminate the extortionate "return on investment" PG&E proposed for itself. It would provide enough money to pay PG&E's debts and return the company to creditworthiness. It would provide enough cash so PG&E shareholders would actually earn higher rates of return on their investments than before the energy crisis.
And it would save ratepayers $2.8 billion over nine years. While the price tag is high for consumers under either proposal, a savings of this size is worth capturing for northern California homes and businesses.
Financial analyses by TURN and others attest to the soundness of the proposed modification, and it has won backing from a coalition ranging from the Consumers Union to the CPUC's own Office of Ratepayer Advocates to the California Manufacturing and Technology Association. But don't count on interest groups to go it alone. Be informed, be vocal, and don't be fooled: the brouhaha over the SFPUC may make for good headlines. But the CPUC battle over a bankruptcy that will cost ratepayers billions deserves to be the biggest show in town.
Dennis Herrera is San Francisco's city attorney.