July 24, 2001
Contact: News Department (415) 973-5930
EDITORS: Please do not use "Pacific Gas and Electric" or "PG&E" when referring to PG&E Corporation or its National Energy Group. The PG&E National Energy Group is not the same company as Pacific Gas and Electric Company, the utility, and is not regulated by the California Public Utilities Commission. Customers of Pacific Gas and Electric Company do not have to buy products or services from the National Energy Group in order to continue to receive quality regulated services from Pacific Gas and Electric Company.


SAN FRANCISCO - Pacific Gas and Electric Company today sent a letter to the California Department of Water Resources (CDWR) requesting a public hearing on its revised revenue requirement it filed with the California Public Utilities Commission (CPUC) yesterday. The company also issued the following statement on CDWR's revised revenue requirement:

"Given the significant lack of detail contained in the Department of Water Resources' revenue requirement filings, it is very difficult to determine the impact either version may have on California utility customers. Furthermore, the changing nature of CDWR's numbers, the use of numbers with the media that do not appear to be supported by the filing itself, the unsupported conclusion that CDWR's costs can be recovered without diverting revenues needed to pay the utilities' costs, and the failure to provide any revenue numbers beyond 18 months in the future, all combine to create a disconcerting level of uncertainty and confusion over what the filing really means.

"Given the tremendous importance of this issue - that is, the determination of how much our customers will be required to pay for electricity purchases by CDWR now and in the future - this lack of information should be a cause of great concern for all parties.

"In an effort to dispel this confusion, and obtain the information necessary to understand CDWR's filing, Pacific Gas and Electric Company believes that a full, fair, and public evidentiary hearing should be held on CDWR's revenue requirement and the costs it is incurring for power purchases. The company today sent a letter to the department requesting such a hearing be held."

Among the missing data, discrepancies, and conflicting claims such a hearing should dispel are the following:

  • Dramatic changes appear to have been made in the filing between Sunday night, when it was presented to the media, and Monday morning, when it was available on the CDWR website. These changes include a $600 million increase in revenue recovery from PG&E customers during 2002, at a time when rates should be falling because of increased competition and lower gas prices (Table A-2, PG&E Customer Revenue Requirement divided by PG&E Retail Sales). The overnight changes also include a $1 billion increase to Edison customers during 2002.

  • In briefing the media, CDWR representatives reported that in addition to receiving the current utility energy charge (approximately 6.5 cents/kwh for PG&E and 7.2 cents/kwh for SCE) for its power purchases, the department would only need an average 1.65 cents/kwh of the 3 cent surcharge imposed by the CPUC in March. But according to the department's filing, the average cost the department is seeking from California utility customers is actually 10.8 cents/kwh over this year and next (Table A-1, Customer Revenue Requirement divided by Retail Sales (GWhs); CPUC Decisions 01-03-081 and 01-03-082, approved March 27, 2001).

  • Furthermore, given the lack of information provided in the department's filing, it is impossible to verify the 1.65 cents/kwh number, or whether CDWR's rate increase will translate to an increase in customer rates.

  • Under the CPUC's interim financing order, CDWR currently receives approximately 9.5 cents/kwh for its power purchases on behalf of PG&E customers. The new CDWR filing makes clear that the department is seeking to charge PG&E customers a much higher rate, especially in 2002. In that year alone, the department is seeking to charge our customers an average rate of 13.7 cents/kwh. This represents more than a 44 percent increase in CDWR charges - or more than $930 million - to PG&E customers in 2002 (13.7 cents/kwh compared to 9.5 cents/kwh).

  • For SCE customers the increase appears to be even more dramatic: CDWR currently receives approximately 10.2 cents/kwh from SCE customers for its power purchases. In 2002, CDWR is seeking an average of 15.3 cents/kwh, a 50 percent increase - more than $1.2 billion - in charges to SCE customers.

  • While earlier financial projections by CDWR provided information on expenditures and revenues into 2006 and beyond, this filing only contains data for the next 18 months, ending in December 2002. Such an omission makes it impossible to analyze CDWR's claims to the media that a rate decrease could be likely in 2003.

  • The CDWR filing does not include any financing costs (debt service payments) related to the bonds prior to September 2002. However, the filing notes that beginning on September 1, 2002, the department will be required to make debt service deposits amounting to 5 percent of the outstanding balance on the bonds (page A-3). According to the filing, it appears that the outstanding balance at that time will exceed $10.3 billion. It is unclear if this means additional revenue from customers will be required, totaling over $500 million in 2002.

  • The CDWR filing defers recovery of principal payments for the Debt Service Account until March 1, 2003. Since the department does not provide its customer revenue requirements past December 2002, it is unclear whether these payments will result in an increase in charges to customers beginning in March 2003.

  • In the most recent version, CDWR estimates PG&E's Residual Net Short to be 48,078 GWh from Jan. 17, 2001 through December 31, 2002. This appears about 10,000 GWh lower than CDWR's April forecast, but no supporting information is included to explain this discrepancy. On the other hand, Edison's Residual Net Short is slightly higher now, compared to the department's April forecast.