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PG&E plan blasted by judge Utility must draft proposal to pay off debt without passing billon t o customers Source: San Francisco Examiner Publication date: 2000-10-28

An administrative judge dealt a stiff blow Friday to PG&E's efforts to recoup nearly $3 billion in debt by handing the bill to its customers, and chastised the utility for failing to follow her order in drafting a recovery plan. Angela K. Minkin, an administrative law judge for the California Public Utilities Commission, sharply limited the scope of debate that will occur this year on parent company PG&E's debt recovery effort. Minkin wants PG&E, as well as Southern California Edison, to draft accounting rule change proposals that would result in a "creative and equitable solution" to the problem.

She dismissed the position papers filed by the two utilities as not addressing the most pertinent issue: specifics on how they would propose to pay off this debt, and particularly whether they would use some of the profits they have made to do so.

Minkin went so far as to tell top lawyers for the two utilities to review the proposal put forth by The Utility Reform Network, a consumer advocacy group - which essentially argues that the utilities should pay all the debt themselves - as being the most on-point.

"I didn't see any accounting proposals that were responsive to my request," Minkin told the lawyers during a public hearing. She also said the two utilities' propos

als to end the freeze on electricity rates were "inappropriate" at the moment.

Decision falls short

The decision was far short of what the utilities were seeking. Their representatives had walked into Friday's meeting expecting reassurance they would eventually be allowed to pass on their costs to consumers. In advance of the meeting, the two companies had filed position papers aggressively seeking rate hikes - 10 percent in PG&E's case - less restrictions on power purchasing practices, an end to the current rate freeze and a confirmation that they would be allowed to recoup their debt.

The two utilities took on an enormous amount of debt last summer to cover skyrocketing costs on the wholesale power market that they were prohibited from passing on to customers due to the rate freeze.

Last week, the commission said it would reconsider earlier rulings blocking the utilities from passing on those debts to consumers. That decision enabled the utilities to tell investors - who would have reacted negatively had the companies not been able to recover the debt and instead be forced to account for a financial loss - that they expect consumers to eventually pick up the tab. PG&E reported third-quarter profits of $225 mil

lion earlier this week.

Devastating financial blow

Roger Peters, PG&E's general counsel, argued before Minkin that it would be unfair to force the utilities to cover the cost of their customers' electricity, and that being blocked from passing the debt on to customers would be a devastating financial blow.

"If we can't recover those costs, that's the end of the game," he said.

But Bob Finkelstein, a staff lawyer for TURN, argued against granting PG&E's requests, dismissing the company's filing as a "utility wish list."

TURN is advocating that the utilities use profits they have made from the sale of electricity and other fees - which the organization places at $4.8 billion combined this year alone - to cover their debts.

Minkin's decision appeared to catch the utilities by surprise. Peters said the company would consider a rapid intermediate appeal. "We're evaluating it," is all he would say when asked to comment afterward on the judge's decision.

-- Martin Thompson (, October 29, 2000

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