PG's secret strategy: more deregulation                                                 
 	 		 		 		
Busted! | April 18, 2001 | SFBG News
 						
By Savannah Blackwell
 						
One of Pacific Gas and Electric's senior vice presidents, Dan 
Richard, came to a brown-bag media lunch at the office of KGO, 
channel 7, last Wednesday, and his remarks were among the 
clearest indications to date of PG's carefully orchestrated 
campaign to get rid of the last bit of regulatory control the 
state still has over private utilities.
 						
His comments – confirmed by a secret memo leaked 
[http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/15/M
N176098.DTL] to the San Francisco Chronicle last week – 
demonstrate the astonishing arrogance that still reigns at a time 
when PG's public credibility is collapsing faster than the 
company's cash flow. In short, PG is still unwilling to admit 
that deregulation was, and is, a bad idea. Instead, the company 
insists that the state should deregulate even more.
 						
Richard complained that the California Public Utilities 
Commission (which consumer activists say has been more than 
friendly to PG) has helped drive the company bust by refusing to 
lift the freeze on rate hikes – a freeze the utilities themselves 
supported as part of the 1996 deregulation bill.
 						
By refusing to lift the freeze, the CPUC has helped protect 13 
million customers from the "rate shock" experienced by customers 
of San Diego Gas and Electric Company last summer. And it has 
left PG holding what its representatives describe as a $9 billion 
bill. (Consumer groups say the real bill is much lower – closer 
to $4 billion – and that PG's parent company has plenty of cash 
to pay the bills.)
 						
Richard's remarks were just one piece of the growing body of 
evidence pointing to the fact that PG's bankruptcy filing is part 
of a secret strategy to save its private monopoly power in 
California. Indeed, the evidence is everywhere:
 						
• In January, when the Chronicle published an article 
[http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/02/04/MN184
122.DTL] criticizing the state for being slow to react to 
skyrocketing costs, Richard laid blame at the door of the CPUC. 
He said the agency had prevented the company from signing 
long-term contracts last summer that would have helped the 
utility bring down the price it pays for power.
 						
In reality, CPUC sources said, the reason the agency did not sign 
off on what PG wanted last summer was that the utility was 
demanding that the agency either give up all its oversight over 
PG's contracting process or guarantee that if the company lost 
money in the deal, the ratepayers would get stuck with the costs
 						
• The company's April 6 federal lawsuit seeking to force 
ratepayers to cover the entire cost of the debt incurred buying 
high-priced wholesale power boils down to a fundamental challenge 
to the CPUC's right to control regulatory relief – namely, to set 
rates – consumer activists say. "That lawsuit is saying the state 
illegally implemented a rate freeze," Matt Freedman, staff 
attorney for the Utility Reform Network, told us.
 						
• By all accounts the "deal breaker" in the talks between Gov. 
Gray Davis and PG was the utility's demand that the agency lose 
its control over rates for PG customers. "They wanted to neuter 
the CPUC," Freedman said.
 						
• PG's bankruptcy lawyers moved to establish federal judge Dennis 
Montali's authority over the CPUC by demanding that he issue a 
restraining order against the CPUC's regulatory change to PG's 
accounting methods. A lawyer for the CPUC called the move a 
"declaration of war."
 						
CPUC commissioner Carl Wood told us he agrees that PG is trying 
to use bankruptcy to get out from under regulation. 
"Deregulation," Wood said, "was based on a fiction – which is 
that competition is possible in the industry." He said that PG's 
campaign against the CPUC was inappropriate. Indeed, Wood said 
that the CPUC needs to go back to the days when it acted as the 
consumers' advocate and protector.
 						
PG, Wood said, "wants to be free of regulation so they can go out 
and make more money. But that's not in the public interest."
 						
E-mail Savannah Blackwell at savannah_blackwell@sfbg.com 
[savannah_blackwell@sfbg.com] .
 						
[http://www.sfbg.com/searchit.html]