Scrap the PG&E bailout

THE CALIFORNIA PUBLIC Utilities Commission is slated to vote Dec. 18 on a plan to allow Pacific Gas and Electric Co. to emerge from bankruptcy – and the entire process is a mess.

There are now six different proposals coming from the five-member commission. All of them would give PG&E far more money than it needs and stick ratepayers with far too high a bill. Far too much of the negotiating has happened behind closed doors, and the public has had far too little input. The commission needs to scrap every one of the proposals and start all over again.

On a technical level, the issue involves how much money PG&E needs to repay its creditors, and how much it will require over the long run to regain credit-worthy status. But at the heart of the matter is a bigger question: is the CPUC really willing to regulate this utility, or is PG&E going to be calling all the shots?

Back in June, a CPUC administrative law judge signed off on PG&E's proposal, which calls for ratepayers to fork over a whopping $9 billion to get the company back on its feet. At a special hearing Dec. 8 of the state senate's Committee on Energy, Utilities, and Commerce, evidence and testimony showed repeatedly that the PG&E plan amounts to the most expensive possible option.

Among other things, nobody has ever done a line-by-line analysis of the PG&E plan. And it's obviously full of pork: evidence presented at the hearing, chaired by Sen. Debra Bowen, showed that more than $200 million would go just to pay for legal expenses incurred by PG&E's corporate parent in Maryland. That's not money the California utility needs in order to get out of Chapter 11 bankruptcy; it's just cash out of the pockets of state residents and businesses the out-of-state corporate entity wants to grab.

The plan would give PG&E a guaranteed return on equity of 11.22 percent over the next nine years. That's a juicy deal – in a recession-plagued state, very few private businesses, particularly small businesses suffering under high electric rates, are earning anything like that. Worse, the proposal would require the CPUC to legally guarantee that PG&E remained credit-worthy. Conceivably, that could force the panel to raise rates even higher – even if PG&E's own mismanagement causes the company financial problems.

And the entire thing was negotiated with unprecedented secrecy, with a federal bankruptcy judge placing a gag order on all participants and the public effectively cut out of the process.

The best alternative so far comes from the activist group the Utility Reform Network, which has suggested a way to save consumers between $500 million and $2 billion. The TURN plan would need approval from the state legislature – but Bowen predicted that if the CPUC offered that alternative, the legislature would almost certainly go along – and so, she suggested, would Gov. Arnold Schwarzenegger.

But even the TURN plan falls short of offering the only real long-term solution to the energy crisis: public power. The clear, unequivocal message that comes out of the entire price-gouging, bankruptcy, and market-gaming deregulation fiasco of 2001 to 2002 is that private companies can't be trusted with the state's energy future.

Remember: during the worst days of the crisis, when rolling blackouts and sharp price hikes plagued much of the state, the lights remained on (and the bills remained stable and low) in Los Angeles, which operates its own municipal utility. Bowen has done great work exposing the shortfalls in the current bailout proposals; the next step is to start holding hearings on a statewide public power plan that would eliminate any need to protect PG&E, prop it up for the next decade, or worry about its ability to borrow money and sell its stock.

In the meantime, the CPUC needs to reject all of the current plans, go back to the drawing board, and present an alternative designed not to protect PG&E but to give consumers the lowest prices possible. And the message for the new mayor of San Francisco could not be more clear: kicking PG&E out of town and setting up a municipal utility have to be at the top of the political agenda.