Report Sees Damage From PG&E; Hydro Sale

Any sale of the hydroelectric-power-generation system owned by Pacific Gas & Electric Co. would cause environmental harm, some of which could not be mitigated, according to a draft environmental- impact report prepared for the California Public Utilities Commission. The best alternative from an environmental standpoint, the report concluded, was for the San Francisco utility to retain ownership of the hydroelectric properties, which are capable of producing nearly 3,900 megawatts, or enough to power nearly 4 million homes. Pacific Gas & Electric last year proposed auctioning off the assets and in August announced a settlement with environmental groups under which the assets would be transferred to an unregulated subsidiary of PG&E; Corp. for $2.8 billion. A PG&E; spokesman saidt the company has withdrawn that settlement offer because the value was now too low given current market prices for electricity. Utility executives had not yet seen the report and therefore could not comment, he said. The 4,000-page environmental report said that any sale would put much of the assets outside regulatory control and a new owner probably would operate the properties differently to maximize profits. Market power concerns also were raised. The PUC is scheduled to make a decision on the proposed sale of the assets in the spring after a series of hearings.