PG&E Customers Will Pay Millions More

The California Public Utilities Commission (CPUC) today granted Pacific Gas and Electric Company (PG&E) a rate increase of $213 million per year, despite strenuous objections from consumer groups that believe PG&E rates are already much too high.

The Utility Reform Network (TURN), a non-profit advocacy group with a long track record of representing consumer interests on utility issues, said the rate hike is a blatant gift from the CPUC to PG&E.   According to TURN, the proposed decision of the administrative law judge (ALJ) who had overseen the case from beginning to end identified $43 million of savings that could be achieved without jeopardizing the utility's ability to provide safe and reliable service.  "The CPUC could have reduced rates simply by saying PG&E shareholders don't need another $43 million per year on top of rates that are already among the highest in the nation," said Bob Finkelstein, TURN's executive director.  "Instead they opted to let the utility siphon tens of millions more each year out of consumers' pockets, knowing these amounts flow directly to shareholders."

The ALJ's proposed reductions came from two primary adjustments:

• PG&E customers fund the company's "employer match" for stock purchases made by PG&E employees.  This employer match produces a tax deduction for PG&E Corp, the holding company of the utility.  The ALJ's decision concludes that where customers fund the purchases, associated tax benefits should flow back to customers.  Although the CPUC previously adopted TURN's proposed treatment on this issue for Southern California Edison, the Commission ignored its own precedent in favor of an approach that left nearly $30 million per year of customer's money in PG&E shareholders' pockets.
• At the end of 2005 PG&E held customer deposits of nearly $150 million.  The company uses these funds as a substitute for capital it would otherwise have to raise in the market.  Capital raised in the market earns an authorized rate of return.  The ALJ would have required PG&E to provide its customers the market rate of return on funds they had provided through such deposits (the same approach the CPUC recently adopted for Southern California Edison Company), which would have reduced rates by about $12 million per year.  The CPUC instead decided to allow the utility to continue relying on its customers as a source of below-market financing, and to charge higher rates as a result.

 "PG&E rates were already among the highest in the nation before this latest increase," pointed out TURN's Finkelstein.  "Regulators with the public's interest in mind would respond by seeking out all opportunities to reduce rates, especially where those reductions are in areas that would not affect the utility's ability to provide safe and reliable service.  Instead, the CPUC demonstrated that they care far more about PG&E's shareholders shoring up their profits.   And PG&E customers will pay a premium totaling at least $172 million over the next four years as a result."