PG&E; Dives on Fears of Continued Rate Freeze

Prices that are good for energy explorers and producers aren’t necessarily so for electric and gas utilities, Wall Street was reminded on Wednesday.

Shares of PG&E; Corp., owner of Pacific Gas & Electric, slid for a second day on concern state regulators won’t end a rate freeze that forces PG&E; to sell power to retail customers below cost.

The stock (PCG) slumped $3.06 to $22.81 on the NYSE, cutting the year-to-date gain to 11%.

Edison International (EIX), parent of Southern California Edison, also fell, losing 44 cents to $21.94.

PG&E; had rallied with many other electric utilities this year, reaching a high of $31.64 on Sept. 11. But investors now are concerned that PG&E; will face difficulty persuading the state to end the four-year rate freeze, analysts said. The company has said it lost $2.2 billion from about June to August because it sold power at prices below cost.

“People have suddenly realized that there are regulatory issues associated with the stock,” said Paul Patterson, an analyst with Credit Suisse First Boston Inc., who rates PG&E; a “hold.”

PG&E; said the price it paid for a megawatt hour of power during the U.S. summer months rose to an average of $187 in 2000 from $31 in 1999. Under the rate imposed in 1996, it was allowed to charge only about $54 a megawatt hour.