Sandi's on vacation this week.  There are rumors that PG&E's actively seeking 
a negotiated solution with legislators and the Governor, but I can't verify 
and don't have details on what the negotiated agreement might look like.  
While's Sandi's away, have asked Mona to check in with our Sacramento 
lobbyists to poke around for information.  Will report back soon as we get 
more info.




James D Steffes
09/16/2000 01:12 PM
To: Jeff Dasovich/SFO/EES@EES, Sandra McCubbin/SFO/EES@EES
cc: Harry Kingerski/HOU/EES@EES 
Subject: PG&E Rate Cap End

What is going on with this issue politically?  If PG&E gets its rate cap 
removed, we need to make sure that this doesn't create more problems for 
wholesale markets?

Jim

___________________________________________________________-  

California's largest utility is pushing to end a four-year-old retail rate
freeze that has protected millions of Northern Californians from the price
volatility in the wholesale electricity market that  rocked San Diego this
summer.  PG&E Corp. wants to end the price freeze imposed in 1996 by the
state legislature because it is losing money under the arrangement.  PG&E's
move is going to set the stage for a major confrontation between the utility
and state regulators -- the California Public Utilities Commission will have
to balance conflicting needs: the utility's desire to protect its
shareholders from huge losses and the commission's duty as a regulator to
protect the public from a flawed market that appears incapable of delivering
"just and reasonable rates required by law."  California legislators fear
that the state could fall into a recession if electricity prices do not drop
soon.  California's 1996 deregulation law required all investor-owned
utilities to freeze rates at seemingly high levels.  Utilities were allowed
to use surplus revenues to pay down generation-related debts that regulators
said would render them uncompetitive in a deregulated world.  It seemed to
work well until this summer in California  --  wholesale prices for
electricity went up suddenly -- and the average price of power consumed
today -- for example -- is $ 200 a megawatt hour or nearly four times the
amount that PG&E can bill its customers.  State Senator Debra Bowen,
chairwoman of the California Senate utilities committee commented that the
legislature is reluctant to become involved -- she said further, " [T]he
legislature feels like somebody who's fallen into poison oak enough times
that all we have to do is walk past a bush and we break out in a rash.
That's the way we react to these energy issues."