- April 6 - PG&Es decision to file for bankruptcy protection will make it more difficult
for the state to negotiate deals with power generators to bring reliable and affordable
electricity to consumers, and it could put an end to the states efforts to take
control of transmission or generation assets as a method to regain control over sky-high
wholesale prices. As a result, PG&Es bankruptcy filing will result in even
higher prices and less reliability than was predicted earlier for this summer.
PG&E claims that bankruptcy is its only option because it cannot pass the
exorbitant costs of wholesale electricity on to its customers due to the retail rate
freeze. The rate freeze, however, was a crucial compromise supported by PG&E in the
1996 deregulation legislation. The utility demanded that consumers pay more than $8
billion of the utilitys stranded costs payments the utilities owed on nuclear
plants and other poor investments from the past. Since consumers would be overpaying for
electricity to cover these stranded costs, PG&E agreed to a rate freeze. In exchange,
PG&E willingly agreed to accept market risk.
PG&E has had its way with California elected officials throughout
deregulations failure. Instead of shoring up the utilitys financial condition,
the company used consumers stranded cost overpayments to go on a $9 billion,
out-of-state shopping spree. At the same time, PG&E convinced lawmakers that the only
way to avoid bankruptcy was for the state to spend tens of millions of dollars a day
purchasing overpriced electricity on its behalf. Finally, PG&E successfully persuaded
federal authorities in January to allow it to transfer its assets to a new
corporate entity, with the sole purpose of shielding assets from bankruptcy proceedings.
These greedy tactics will result in higher taxes and higher electric rates for California
households and businesses.
There is plenty of blame to go around. No doubt former Gov. Pete Wilson and the 1996
Legislature lied to California consumers about the supposed benefits of deregulation. But
PG&E and the other utilities lobbied hard for the legislation, contributed tens of
millions of dollars in campaign contributions to ensure its passage, and made huge profits
under the first few years of deregulation. California must demand that PG&E
shareholders assume the costs for the utilitys mistakesnot taxpayers.