PG&E Sues to Recover $3 Billion 

Exploring yet another legal avenue, Pacific Gas and Electric Co. Wednesday 
filed in San Francisco's federal district court asking for a judicial ruling 
that will mandate that it can recover all of the nearly $3 billion in 
uncollected wholesale electricity costs that have been mounting since May 
when price spikes in Califonia's market left the state's major investor-owned 
utilities vulnerable because their retail power rates are frozen at 1996 
levels. 

The utility argued that the wholesale power costs are federally approved, 
therefore, it filed in federal court. Earlier in the fall, PG&E appealed to 
the California Supreme Court, asking to overturn a California Public 
Utilities Commission decision this summer that limits its ability to recover 
its wholesale costs, which it passes on to customers without adding a profit 
charge. 

"We're just keeping our legal options open," said a San Francsco-based 
utility spokesperson, noting that the utility also is attempting to protect 
its financial status, which was challenged Tuesday when Fitch placed it and 
another California utility on a "rating negative watch." 

State and federal officials all acknowledge as part of a series of ongoing 
investigations that California's current wholesale electricity market is 
broken and noncompetitive in its current state, said Roger Peters, senior 
vice president and general counsel for Pacific Gas and Electric. "However, 
there has not yet been any concrete action by regulators to provide for 
recovery of the costs we have incurred to purchase the power our customers 
must have, either through refunds from power sellers who charged unfair 
prices, or through retail rates. These costs are continuing to grow." 

Noting both the unfairness and unpopularity of the skyrocketing wholesale 
charges, PG&E's utility nevertheless said it has a legal right to recover the 
charges from its almost four million customers, and it reiterated five steps 
it has taken to "increase supply, moderate customer demand, repair the broken 
wholesale market and provide stable, reasonable rates."