Two Energy Rulings Are Bad News for State
As a Bankruptcy Court judge offered a glimmer of relief to some of Pacific Gas & Electric Co.’s most hard-pressed customers Tuesday, taxpayers appeared to take the brunt of two other rulings that could add millions to the state’s tab for buying power.
Judge Dennis Montali, presiding over PG&E;’s massive bankruptcy case in San Francisco, ruled that the utility can refund almost $95 million in deposits paid by residential and nonresidential customers before it filed for Chapter 11 protection on Friday.
PG&E; argued that the refunds are necessary to avoid hardship to consumers and to maintain customers’ confidence in the utility’s ability to serve them.
As of the filing, the company said it held about $28.1 million in deposits from residential customers with questionable credit histories or who had fallen behind on utility payments. PG&E; also listed $66.7 million in deposits paid by nonresidential customers. The ruling cleared the way for checks to be issued to 27,706 clients.
The judge balked, however, at a separate request to refund $286 million in deposits from customers who needed main line service brought to them. “Why should we do that so early in the case with such a sizable amount of money?” he asked the utility’s lawyers.
Even as some consumers recouped money in one forum, they may have been losing it, indirectly, in others.
Two unheralded recent rulings by a federal appeals court and the Federal Energy Regulatory Commission could add $5 million to $7 million to the estimated $50 million the state lays out each day to buy power for cash-strapped PG&E;, Southern California Edison and San Diego Gas & Electric Co.
The FERC decision, handed down Friday, unraveled the California Independent System Operator’s system of forwarding bills for pricey last-minute power buys to the utilities. The commission ruled that Cal-ISO must have a credit-worthy buyer for the deliveries, so the tab will now go to the state, a Cal-ISO spokeswoman said.
The decision infuriated California officials, who implied that FERC was unsympathetic to California’s concerns and issued its decision too quickly.
“When it comes to increasing costs for California taxpayers, it takes them 24 hours, but when it comes to reducing costs, they don’t act at all,” said Steve Maviglio, a spokesman for Gov. Gray Davis, speaking figuratively. In a related case, the 9th Circuit Court of Appeals lifted an injunction last week that required Reliant Energy to continue to sell electricity to Cal-ISO. The ruling was a blow to the state, which lost the leverage of guaranteed supply, and a victory for the Houston-based company, which is owed $370 million and is negotiating long-term contracts for energy with the Department of Water Resources.
Power producers suggested the rulings might make the California market more appealing by creating more certainty that suppliers will be paid.
“All of these things combined will reduce the amount of risk that companies like ourselves see in the marketplace,” said Richard Wheatley, a spokesman for Reliant.
Wall Street did not appear to share Wheatley’s view. In a sign of its growing concern for the state’s credit-worthiness, Moody’s Investors Service on Friday changed its outlook on California’s general obligation bonds from “stable” to “negative.”
The rulings spelled more bad news for the state’s budget.
The state has committed $4.7 billion since January to purchase power for the utilities, and some experts expect that to be dwarfed in coming months as usage rises.
A report issued last Wednesday by UC economist Peter Navarro and the Utility Consumers’ Action Network pegged the amount that the state could end up spending on power this summer at $50 billion.
The report suggests that state officials should seize the California plants of any energy companies that balk at selling power at fair prices. Such prices could be established by a “buyers cartel” consisting of California, Oregon and Washington.
“President Bush and Gov. Davis both say we’ve got to have conservation,” Navarro said. “That’s wishful thinking for this summer, when the dismantling of the California economy is going to occur.”
Conservation may not be enough, experts acknowledge. But a UC Energy Institute study released Tuesday showed that Californians do rein in power usage considerably in response to higher prices, and that conservation could indeed ease the summer’s power crunch.
When San Diego Gas & Electric doubled its rates last summer, San Diegans cut their consumption by 1.6% on average, and 6% during peak late afternoon and evening hours, Berkeley researchers James Bushnell and Erin Mansur found.
Under proposals being reviewed by the California Public Utilities Commission, Edison and PG&E; customers would face smaller rate hikes this summer than those imposed, then retroactively rescinded, in San Diego last year.
If San Diegans’ conservation rates were matched statewide, demand on California’s power grid would decline by 2,500 megawatts--enough to serve about 2 million homes, the researchers concluded. Experts estimate that the state faces an overall electricity shortfall this summer of 3,000 to 7,000 megawatts, depending on summer temperatures and hydroelectric supplies.
“It is critical that we get a demand response to these higher prices,” said Energy Institute director Severin Borenstein.
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Times staff writers Rone Tempest and Robin Fields contributed to this story.
* SLIDING PRICES
Prices for bonds sold by the state are sliding amid concerns that the recent bankruptcy filing by Pacific Gas & Electric will further complicate the ongoing energy crisis. C1
