Chronologically Ordered LOCAL POWER News Index Local Power drafted the H Bond Authority with San Francisco Supervisor Tom Ammiano in 2001 PG&E Bankruptcy Bailout to Deliver Lower "Rates" But Higher Electric Bills:

"Shell Game" Bailout Repeats False Promises of AB1890 Bailout & Brings PG&E's Bailout Total to $16 Billion

San Francisco, Dec. 21, 2003. After a slim majority (3-2) of the California Public Utilities Commission (CPUC) approved a record bailout of Pacific Gas & Electric's (PG&E's) bankruptcy that will take Northern California residents and businesses nine years to repay, U.S. Bankruptcy Court Judge Dennis Montali ruled that the plan, which would puts ratepayers on the hook to pay PG&E's creditors and resuscitate the corporation, complies with state and federal law.

If added to the $8 billion in previous bailout funds already paid to PG&E by its ratepayers since 1998, the new bailout will bring the total to over $16 Billion, rivalling Governor Schwarzenegger's $19 Billion bond to solve California's debt crisis.

The bailout plan was approved by the CPUC and the Bankruptcy Judge despite the fact that California Attorney General Bill Lockyer has accused PG&E's officers of siphoning $4 Billion to its unregulated holding company, PGE Corp, out of the $8 Billion in "Competition Transition Surcharge" funds already paid to PG&E by its ratepayers between 1998 and 2000. Judge Montali modified the settlement to allow for California to prosecute this crime and if successful to collect the funds - yet the fact remains that the CPUC negotiated the deal with a corporation accused of $ multi-billion high crimes by the state's top cop.

PG&E and The Utility Reform Network (TURN), who proposed the bailout deal, promised that it would cut rates as early as next month, but ignored the electric bill impacts implicit in the fact that the plan will ultimately saddle ratepayers with most of PG&E's $12 billion in debts. In other words, while "rates" might be lower, electric BILLS will increase with new bailout surcharges that will now appear on every ratepayer's monthly electric bills for nine years. Former Governor Davis-appointed CPUC President (and ex-Southen California Edison President) Michael Peevey, who championed the bankruptcy bailout after brokering Southern California Edison's 2001 bailout settlement, claimed last week that savings from the bailout and other sources could reduce rates by nearly 16 percent during 2004. PG&E spokesman Ron Low said electricity rates will drop immediately by $670 million, or about 7 percent, once the plan takes effect.

However, the promised "rate reductions" will not mean lower, but rather higher, electric bills for PG&E customers. The $ multi-billion bailout relies heavily on customer electric bill surcharges to refinance PG&E's debt. But overall, according to the CPUC staff, the utility's 4.8 million customers will pay between $7 billion and $8 billion of PG&E's bankruptcy- related costs, an average of $1,458 to $1,667 per customer over nine years. This payment will appear as a new non-bypassable surcharge on monthly electric bills averaging $162 to $185/year ($14 to $15/month). Because the surcharge will net higher monthly electric bills, many critics call the promised rate reductions a "shell game" that deceived some California Chambers of Commerce and non-profits such as NAACP into backing PG&E's bailout based on promised "rate reductions" - a ploy that was similarly successful in justifying PG&E's previous 1998-2000 "stranded costs" bailout.

PG&E's rates, already among the nation's highest, were boosted an additional 40 percent by the CPUC in early 2001 in a futile attempt to stave off the utility's bankruptcy. After filing the bankruptcy, PG&E sued the state of California for $11 billion and proposed a corporate reorganization that would have ended most state regulation of its rates. Adverse rulings by Judge Montali and an appeals court blocked PG&E's ability to threaten such a "re-deregulation" of its assets, but the CPUC neglected to take advantage of its strengthened position and went on to approve the bailout nevertheless, riding on Commissioner Peevey, former Davis Chief of Staff and now Commissioner Susan Kennedy, and a former San Francisco Public Defender, Commissioner Geoffrey Brown. Commissioners Loretta Lynch and Carl Wood voted against the bailout, calling it both illegal and unconstitutional. Local Power registered its strong opposition to the plan before the Commission voted on Friday.

Judge Montali delayed the effective date of the bailout until at least Jan. 5 to give opponents time to prepare appeals and requests for further delays. The city of San Francisco is expected to challenge the plan as city attorney Dennis Herrera said last week that the plan places too much of the burden on ratepayers and too little on PG&E and its shareholders. Of the $12 Billion, PG&E shareholders will contribute less than $2 billion from a dividend freeze that is expected to end next summer.

Related Documents:

December 18 is "Double Dip Day" At California Public Utilities Commission with Proposals to Bail Out PG&E and Put the State's Ratepayers on the Hook Again for Utility Contracts & Power Plants (Local Power News, December, 2003)

Local Power Joined by Greenpeace USA, Public Citizen, and Local Groups in RAGE Coalition Opposing CPUC Plan to Put Ratepayers on the Hook for $ Multi-Billion Utility Power Contracts and New Gas-Fueled Power Plants (December, 2003)

For more information or to sign up for Local Power News, please visit Local Power.


Founder and Director of Local Power, Paul Fenn is author of California's Community Choice law, AB117 or Chapter 838 of 2002, which allows municipalities to switch their communities to alternative energy providers - as well as author of San Francisco's 2001 voter-approved "Solar Bond" or "H Bond" authority, and a plan to use H Bonds and Community Choice aggregation to take 1/4 of San Francisco's electricity load off-grid by 2012 with solar power, wind power, conservation and energy efficiency technologies. Mr. Fenn is also author of new state "Solar Networking" legislation, Senate 697, sponsored by Pomona Senator Nell Soto. Local Power is based in Oakland, California and may be found at

Copyright 2003 by Local Power.