Watchdogs Quiz Energy Officials at PUC Hearing

Bouncing from outrage to despair, consumer advocates grilled utility executives Friday for the first time, demanding to know how they could justify million-dollar salaries and fat shareholder dividends while pleading poverty before the state Public Utilities Commission.

Executives of Pacific Gas & Electric, who are demanding a 26% electricity rate increase that would be effective next week, patiently explained that the money they have spent on executive compensation and dividends is small change compared to their mounting multibillion-dollar losses.

They also acknowledged that they are unlikely to be satisfied with a 26% increase and will expect follow-up rate hikes, for a total of about 40% over the next two years.

Southern California Edison, whose officers are scheduled to be cross-examined by consumer advocates when the PUC hearing resumes Tuesday, is seeking an even larger rate increase--an average of 30% immediately, to be followed by an undetermined number of 5% rate hikes over the next two years. The immediate increase would in fact amount to 33% for most residential customers, but less for low-income households and 30% for most businesses.

The two utilities say they have been driven to the brink of insolvency by an unexpected surge in wholesale electricity prices in the state’s newly deregulated market.

Municipal utilities such as the Los Angeles Department of Water and Power were not deregulated and are not seeking rate hikes.

Consumer advocates appeared frustrated and, at times, floored by the figures being thrown around by the private utility officials Friday.

“It’s almost like the kind of thing nations have gone to war over,” declared Jason Zeller, an attorney with the PUC’s independent consumer arm, the Office of Ratepayer Advocates, expressing outrage over hundreds of millions of dollars being made by electricity wholesalers at the expense of the utilities and their customers.

The PUC is expected to rule on the utilities’ rate hike request on Thursday--a day that will be closely watched on Wall Street.

Credit rating firms warned this month that if the PUC does not approve “substantial” rate hikes, the credit-worthiness of the utilities will be drastically downgraded, pushing them closer to insolvency.

Though the issue is one of the most urgent and far-reaching ever considered by the commission, only two of its five members attended Friday’s hearing, and they skipped the afternoon session, allowing the hearing to drone on before an empty row of commission chairs. An administrative law judge was in charge.

The two who attended the morning session, Chairwoman Loretta Lynch and Commissioner Carl Wood, spent the afternoon in their offices working, PUC spokesman Armando Rendon said. “As far as I know, they are busy trying to resolve this, and they can’t be in two places at once,” he said.

Two other commissioners, Richard Bilas and Henry Duque, were on vacation, the spokesman said. Another, Josiah Neeper, has stopped attending the discussions because his term ends Sunday and he will be unable to vote next week.

The commissioners are paid $109,799 a year; Lynch receives $113,287 as chairwoman.

“There is a written record being established,” Rendon said in defense of the absent commissioners. He said they could catch up by reading transcripts.

Friday was the first time that utility executives had been subjected to cross-examination under the administrative law format used by the PUC. Four consumer advocates were given a crack at PG&E; executives, and the resulting dialogue revealed, as much as anything, the cultural and financial chasm between their worlds.

One questioner was James Weil, a former administrative law judge from the Placer County town of Foresthill. He represented a 16-member consumer group that calls itself Aglet, the word for the little plastic or metal tip at the end of a shoelace. The idea is that his group operates on a shoestring.

That set up quite a contrast when Weil began questioning Walt Campbell, director of business and financial planning for PG&E; Co., the state’s largest utility.

How, Weil asked, could PG&E; justify its decision this fall to grant shareholders a dividend valued at a total of $116 million when it knew it was in deep financial trouble?

Campbell replied that $116 million simply wasn’t that much money--only a week’s worth of power. Anyway, he said, if the company hadn’t issued a dividend, it would have signaled to the financial community that it was in trouble.

“It could be interpreted as a much more severe situation than warranted by creditors,” he said.

In all, PG&E; Co.--the utility--gave roughly $450 million this year to the parent PG&E; Corp. for dividends, Campbell said.

Campbell also defended the company’s executive compensation, saying it didn’t amount to enough money to make a difference in the overall financial picture. According to filings with the Securities and Exchange Commission, Robert D. Glynn, chief executive officer of the parent PG&E; Corp., earned well over $2 million in salary, bonuses and other compensation last year.

Southern California Edison and its parent, Edison International, are even more generous. John Bryson, president and chief executive of both the parent company and the utility company, earned close to $3 million in salary, bonuses, stock options and other compensation last year, and all board members earned at least $1 million.

Cutting salaries, Campbell said, “might have some symbolic value to customers,” but would do little to assuage the financial community.

PG&E; has estimated that, by the end of the year Sunday, it will have spent $7 billion more on electricity than it received in payments from customers because of current rate caps. Edison estimates its overpayments at $4.8 billion.

In questioning, the PUC’s consumer advocate, Zeller, tried to determine how much money PG&E; Corp., the parent corporation, could give back to its utility subsidiary. Some consumer advocates have charged that the two utilities’ parent companies are flush with cash, and should be forced to bail out their subsidiaries.

But PG&E; officials insisted that their parent company has only $200 million in cash. Zeller questioned whether it could raise cash by forcing another of its subsidiaries, PG&E; National Energy Group, to sell power plants it owns in New England, but company officials said that would take too long to help them in their current crisis.

A package of stories about California’s energy crisis is available at https://www.latimes.com/power.