February 19, 2003

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PG&E's sneak attack
The private utility wants to make you pay for its sleazy campaigns against public power.

By Rachel Brahinsky

SOMEWHERE IN THE massive California Public Utilities Commission offices on Van Ness Avenue there's a roomful of documents several feet high that most people will never see. Wading through the stack is a mind-numbing task, and few ever do it. That's why a request buried deep in the pile to create a new Pacific Gas and Electric Co. program to fight public power – funded by your electric bills – hasn't gotten much attention so far.

The proposal, which was filed by PG&E last October in the midst of its successful campaign against public power Proposition D, would set aside more than $3.2 million to help the company convince customers to stick with it instead of exploring new energy options.

In a nutshell, PG&E wants you to pay for its fight against lower electricity rates and cleaner power. If the proposal had been in place last year, San Franciscans backing Prop. D would have been forced to underwrite PG&E's $2.7 million campaign against them.

If the CPUC signs off on creating the fund, it will reverse decades of careful policy making that has limited how private electric companies finance essentially political activities.

To date, PG&E has been forced to spend its own money – cash that would otherwise be funneled into shareholder profits – on political campaigns. Now PG&E wants ratepayers to cover some of these costs, and the move has the potential to bring on future rate hikes, as well as new fees for customers who seek alternative energy providers.

"This illustrates how aggressive, and even predatory, this company is," Paul Fenn of the Oakland-based Local Power told us. "It's been bailed out twice, then transferred billions to its parent corporation and ring-fenced its profits. Now they want to ask the ratepayers to pay for something that's counter to their interests."

Fenn wrote the California Community Choice law giving cities the right to buy bulk power for residents, which legislators passed last year. In other states (most notably Ohio) the practice has led to lower rates and cleaner power, and many see it as a first step toward forming a full-fledged public power system. "Municipalization is the right of every community. Interference with that right is an act of hostility," Fenn said.

Jerry Jordan, director of the California Municipal Utilities Association, said he knows of no other utility that has tried so blatantly to use ratepayer dollars for political purposes. "I've never heard of anybody reaching quite that far," he said. "That's clearly inappropriate. It may even be illegal."

The proposal is just one of PG&E's attempts to limit consumers' options. The company is simultaneously trying to force customers who install solar power systems to pay new fees (see sidebar).

Under PG&E's proposal, filed as part of a regular reassessment of rates and fees required by the CPUC, the company could use the fund to:

initiate a new tax on customers who leave its system,

perform economic analyses of consumer energy options to lobby customers and elected officials,

negotiate special agreements (such as temporary rate cuts) to keep customers who want to buy power from another provider.

Company spokesperson Jon Tremayne denies the program is political in nature and said PG&E staffers will simply be researching energy options and sharing their expertise with communities. "We're talking about being able to provide elected officials with the analysis they need," he said. Lobbying costs would still be covered by shareholders, he said, and PG&E would give the best advice "on behalf of our customers."

Yet it's hard to imagine a case in which PG&E would tell officials that a public power proposal for their city would be an improvement over its service. Instead the company is likely to bend numbers as needed to make its case.

For evidence, you only need to go back to PG&E's justification of the proposed program. Buried in one section of PG&E's application, and clouded by highly technical charts and graphs, is the tip-off: PG&E says if it's forced to sell its system to a new public power agency, the system would be sold for book value. When it comes to pricing utilities, there's always intense debate over how to value the system. Some say the cost should be the book, or face, value; others argue that it should reflect the expense of rebuilding the entire system from scratch. So for anyone who has followed the public power debate in San Francisco, this is huge news.

For years one of PG&E's most effective arguments against public power has been the high cost of purchasing the system. Typically company spokespeople contend San Francisco's would go for about $1 billion. That number was potent in PG&E's anti-public power campaigns in 2001 and 2002, even fueling the inspiration for the company's front groups: first it created a coalition to "stop the billion dollar bill"; one year later it was the committee to "stop the blank check."

Meanwhile PG&E, in its rate application, contends the average cost for a large city's distribution system is only about $157 million. That means the total cost for San Francisco (which would include some other costs in addition to the distribution system) might not be much higher than this and certainly wouldn't approach $1 billion.

CPUC commissioner Carl Wood said that looking at how PG&E has dealt with its Chapter 11 bankruptcy case, filed in April 2001, and still pending before a federal judge, reveals a lot. "In general, PG&E's behavior with regard to their bankruptcy plan [in which it's asking to be largely freed from state regulation] has been outrageous and anticonsumer," Wood said, adding that he opposes PG&E's new proposal. "Any attempt to use ratepayer money to advance political goals of PG&E is outrageous. Customers have a right to establish municipal systems, and each one should be evaluated on its own merits."

Advocates of local control fear approval of the program would establish a model that PG&E could exploit in the future. "It will set a precedent for them to expand the program and get more funding," Denis Mosgofian, a leader in the labor and the public power movements, told us. If the CPUC approves the program, "it becomes state policy to oppose municipalization."

The public can comment at hearings, which will likely be scheduled in late spring and early summer. Until then, the CPUC will be scrutinizing PG&E's arguments and figures. The public can comment prior to the hearings by contacting the CPUC's public adviser at (415) 703-2074.

E-mail Rachel Brahinsky at rachel@sfbg.com.