PG&E's Hydro Workout: Can This Deal Be Saved?

 

For the utility, wresting its assets from PUC control is the real point.

Gas & Electric Co.'s 17-month-old proposal to divest its hydro assets via auction likely is dead, a casualty of California's ongoing energy market turmoil. Despite this reality, the utility's auction proposal remained active at the California Public Utilities Commission (PUC) as of press time in mid-January, even as the governor and state legislature held emergency meetings amid rolling blackouts.

In his Jan. 8 State of the State address, California Gov. Gray Davis proposed repeal of the state law permitting its three IOUs—PG&E, Southern California Edison Co. (Edison), and San Diego Gas & Electric Co. (SDG&E)—to sell their remaining generating facilities. "Instead," Davis said, "we must require them to hold on to those facilities and sell their power to California consumers."

Separately, within the state legislature, Assembly Speaker Pro Tem Fred Keeley (D-Santa Cruz/Monterey) has proposed legislation that floundered last year to buy generating assets and run them as part of a state authority. Gov. Davis and others also have floated the idea of a California public power authority to correct what he has described as the state's energy "mess."

"California's deregulation scheme is a colossal and dangerous failure," Davis said in his speech. "It has not lowered consumer prices. And it has not increased supply. In fact, it has resulted in skyrocketing prices, price gouging, and an unreliable supply of electricity—in short, an energy nightmare."

Sentiment for blocking the divestiture also is strong within the state commission.