PG&E's not insolvent -- it's just greedy
By Nettie Hoge and Dennis Herrera
[Originally published in the San Francisco Chronicle, Friday, January 25, 2002]
IF THERE'S one thing the Enron debacle has demonstrated, it is that in the energy business, smoke and mirrors are the rule and in the end, consumers are left stranded.
The PG&E bankruptcy plan could be another example. The company is asking a federal court to raise rates by $8 billion for energy produced by generating plants that were built with public funds.
And to add insult to injury, the company is demanding that the court give them the plants, too. Both the plants and the money would go directly from the public into PG&E's parent corporation.
Unlike most people and businesses that file for bankruptcy protection, PG&E isn't insolvent, it's just greedy. According to the California Public Utilities Commission, the company has about $4.9 billion on hand. That's because its rates are already much higher than the cost of providing electricity.
According to a suit filed in January by California Attorney General Bill Lockyer, PG&E's parent corporation pocketed about $9 billion in ratepayer overcharges, securities and other property during the early days of energy deregulation.
After that, the parent company "ring-fenced" all of its most valuable assets, effectively moving them around and walling them off from creditor's claims. Then, PG&E filed its voluntary Chapter 11 bankruptcy, with the most self-serving reorganization plan in history.
If the court gives PG&E what it is asking for, we may wake up one day soon to discover that Northern California's vast hydroelectric power network will belong to PG&E and its parent corporation, not to the people.
The hydroelectric network is an incomparable public asset encompassing 136, 000 acres of pristine watershed, 140,000 additional forested acres, 174 dams, 383 canals, 99 reservoirs and 68 powerhouses.
Amazingly, the court could transfer it to PG&E's parent without any return obligation by the company to the people of California, who have paid for the system with the understanding that their investment would bring them fairly priced electricity while preserving the system's environmental value.
Should the transfer occur, the parent company would be free to use the system however it chooses with no oversight or regulation by the state. It would also be able to take over the Diablo Canyon nuclear plant, where consumers already paid for $4 billion in construction cost overruns.
A thorough environmental impact statement performed by the state concludes that the transfer of these assets to an unregulated energy company would have damaging consequences for the environment. Consumers already know what kind of damage unregulated electric rates can do to their wallets -- and to their safety.
Should PG&E's plan succeed, the same energy that we now buy at about 2.8 cents per kilowatt hour will cost us about 5 cents, netting PG&E roughly $8 billion more from ratepayers over the next 12 years.
PG&E says it needs this revenue to pay its creditors. But the plan generates at least $4.5 billion more than PG&E's debts, money that will go directly into shareholders' pockets. And PG&E could easily pay its debts without turning over its most valuable assets to its wealthy parent.
The plan is clever. It is the best that money can buy. Our money, that is. The cost of designing and defending the plan has already reached $40 million. That funding is coming right out of our monthly electric bills. It ought to be against the law. And it is.
But PG&E says that federal bankruptcy regulations can sweep aside state guarantees of fair and reasonable electric rates, and that the company can simply ignore California's consumer protections.
The court should refuse to transfer any more of California's electric generation assets to unregulated companies, an approach that has already been disastrous for the state.
Unfortunately, the people who will pay the financial and environmental costs of PG&E's plan, California consumers, have been shut out of the proceedings. Some affected groups, including farmers, consumers and large industrial users, attempted to form a ratepayers' committee to represent their interests in the bankruptcy proceeding.
But the court turned them down.
The Utility Reform Network or TURN, which has a 28-year history of representing California ratepayers, also tried to get into court to represent consumers. It, too, was denied participation. Days later, a group of cities and counties led by San Francisco was also denied the voice they sought in court.
The bankruptcy court will hear arguments on PG&E's request to pre-empt state law today. The court knows that alternatives are available, including requiring the company and its affluent parent corporation to use some of the ratepayer money already in their coffers to pay PG&E's debts.
It took nearly 100 years to develop laws that adequately protect utility consumers from corporate abuse. There is no reason to trash those laws now. The public has an enormous stake in the hydroelectric system that's been developed with its money, and that system should not be stolen by PG&E in its quest for windfall profits.
The court should end the exclusivity period that prevents it from hearing alternatives to PG&E's plan, and pursue the plan that will be the least harmful to California.
Nettie Hoge is executive director of The Utility Reform Network. Dennis Herrera is San Francisco's city attorney.