California's top utility regulator on Monday blasted the bankruptcy reorganization plan filed by Pacific Gas & Electric Co. as a "corporate shell game" designed to avoid state oversight.
What's more, the PG&E Corp. subsidiary's claim that customer rates would not rise under the plan is based on a faulty premise about the wholesale price of power, Loretta Lynch, president of the state Public Utilities Commission, said at a news conference in San Francisco.
Pacific Gas & Electric, which filed for bankruptcy protection April 6, has said its reorganization plan would repay all debts through a complex refinancing that would transfer its valuable nuclear and hydroelectric generation assets to the parent company. The utility's remaining distribution assets would be spun off as a separate company.
Consumer rates would be kept stable, the utility says, through a proposed 12-year contract under which it would supply power to customers from the Diablo Canyon nuclear plant and its hydroelectricity facilities at the fixed rate of 5 cents a kilowatt-hour.
The PG&E plan is supported by its creditor committee and Monday was endorsed by the California Retailers Assn.
Lynch, in conducting a news briefing about today's PUC meeting, called the PG&E plan "an attempt to use the Bankruptcy Court as a ploy to finish the deregulation experiment that they couldn't finish through this commission or the Legislature."
PG&E has sought to sell its hydroelectric assets or place a market value on them, which would trigger an end to the current freeze on retail electricity rates. The PUC and the state Legislature have blocked any utility asset sales for the next few years.
The plan, Lynch said, is "a regulatory jailbreak where they, in a corporate shell game, try to create corporate entities to evade proper state regulation" because the assets would be transferred to the largely deregulated parent company.
Lynch also said PG&E's assumption that rates will not rise is "based on a shaky or nonexistent foundation."
Under its plan, PG&E expects to charge 5 cents a kilowatt-hour for its share of the electricity sent to its customers--the 41% that the utility generates with its own resources.
But the state Department of Water Resources, which buys about 34% of the power for PG&E customers, anticipates in its revenue plan that the utility will be paid only what it costs to generate the power, Lynch said. That figure is still being determined but is expected to be "much less" than 5 cents a kilowatt-hour, she said.
(About 24% of the power used by the utility's customers is supplied under contract by small alternative generators.)
PG&E spokesman Ron Low disputed Lynch's reasoning, noting that the rate freeze on residential and small-business customers is due to end next March. The utility and its parent would continue to be regulated by federal entities, with some remaining state oversight, he said.
"It is clear Commissioner Lynch did not review our plan of reorganization before making her comments," Low said. "If she had taken the time to read our plan, she would have found that it fully pays all valid claims without asking the state for a bailout or asking the [Bankruptcy] Court for a rate increase."