Under mounting pressure, Robert D. Glynn, CEO of PG&E Corp., Friday denied PG&E’s plan to reorganize and emerge from bankruptcy is an attempt to escape regulation.
The California Public Utilities Commission and consumer groups have severely criticized the plan as an effort to flee state oversight. PG&E, the holding company for the largest utility in California, filed for reorganization under Chapter 11 of the bankruptcy code in April 2001 and submitted its plan to the court for approval in September.
Glynn defended his company’s plan at a speech before the California State Chamber of Commerce today in San Francisco. Some assets of the company presently subject to state regulation would become subject to federal oversight instead. Others presently subject to both state and federal oversight would no longer be subject to state regulation. But there is no truth to the allegation the company will somehow escape regulators when the plan is approved, he said.
“Nothing could be further from the truth,” Glynn said. “All of the current business elements will continue to be regulated.”
Electricity and gas distribution, representing about 70% of the book value of the company’s assets, will continue to be regulated by the California PUC, he said. High voltage electricity transmission over long distances is already regulated by the Federal Energy Regulatory Commission. That agency will continue to regulate the transmission lines. Some transmission siting issues will stay with state regulators, he said.
The hydroelectric assets will continue to be regulated and licensed by FERC, but the state would no longer have a say in their operation. PG&E’s nuclear power plant will also continue to be regulated by federal regulators such as the Nuclear Regulatory Commission.
The only assets that were state regulated and not regulated by FERC were certain portions of pipelines involved in interstate commerce. These pipelines would be regulated by FERC, but not by the state, once the plan is approved, Glynn said. He said similarly situated pipelines that compete with those belonging to PG&E are regulated by FERC.
“Nowhere in our plan do we ask for our assets to become unregulated,” Glynn said. “In view of the facts, the regulatory alignment under the plan is hardly radical and hardly a flight from regulatory oversight.”
The PUC has also suggested power prices could rise, if PG&E’s utility unit buys electricity from an affiliate that owns the hydro generation, which would no longer be subject to state regulation.
Under a 12-year power purchase agreement, Glynn said, the utility will buy power at a price below what the state purchased power for last summer and at a lower price than what the PUC approved to pay qualifying facilities or small generators.
“Power under this contract will be the lowest cost, major part of Pacific Gas & Electric Co.’s power portfolio,” he said.
The reorganization plan is subject to the bankruptcy judge’s approval and does not have to be approved by state regulators, Glynn said. “The PUC argued that our plan breaks the law. This is a juicy sound-bite, but it has no substance,” he said. “Federal law empowers the bankruptcy court to set aside state law in approving a reorganization plan.”
Finally, Glynn stressed his plan repays creditors 100% with interest, involves no rate increases, no bail out from the state, and state regulators will continue to oversee retail rates.