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Enron Mail |
PG&E Corp.'s profit jumps 243 percent / PG&E Corp. reports $771 million in profit / Lower power costs, rate increases boost earnings
Dow Jones Interactive November 6, 2001 Energy price probes widen to include state officials / Chief of power grid to be questioned Dow Jones Interactive November 6, 2001 PG&E Re-Evaluating New Construction of Pwr Plants - Execs Dow Jones Interactive November 6, 2001 San Francisco to vote on public power Dow Jones Interactive November 6, 2001 PG&E Corp.'s profit jumps 243 percent / PG&E Corp. reports $771 million in profit / Lower power costs, rate increases boost earnings PG&E Corp. enjoyed a 243 percent jump in profit during the third quarter as its utility operations reaped an extra $687 million from a drop in power costs and record rate increases passed last spring. Despite millions in costs related to Pacific Gas and Electric Co.'s bankruptcy case and other losses, the utility's San Francisco parent company yesterday reported $771 million in net income for the three months that ended Sept. 30., up from $225 million during the year-ago period. However, the third-quarter profit could just be a blip. The utility could see profits fall if demand wanes during the winter months when usage declines, said PG&E Corp. spokesman Brian Hertzog. Profit could also decline in future quarters if the state of California boosts its demand for a share of ratepayer revenue, he said. The state has been buying power on behalf of utility customers since January, when PG&E buckled under soaring wholesale electricity rates. For the past quarter the company reported net income from operations of $256 million, (70 cents per share), a slight gain from last year when it posted $248 million in net income from operations (68 cents). The $687 million in profit flowing into PG&E Corp.'s coffers in just three months spurred consumer advocates to push for rate refunds. "It just shows we're paying too much for energy now," said Nettie Hoge, executive director of The Utility Reform Network. Hoge said the company financial report, which shows a $4.3 billion cash balance, strengthens the group's claim that Pacific Gas & Electric Co.'s bankruptcy filing in April was unnecessary to pay off the utility's debts. Hertzog said the third-quarter generation profit pales in comparison to the losses PG&E sustained last winter when power prices skyrocketed and the utility was prevented by a rate freeze from passing on the costs to consumers. The company wrote off $9 billion in unpaid costs, though it is suing to force the PUC to allow the utility to recover the money from ratepayers. Terrie Prosper, a spokeswoman for the PUC, said PG&E Corp. may not get to keep the $687 million. "The quarterly statement reflects money that PG&E Corp. is collecting that the PUC hasn't decided how to allocate." Energy price probes widen to include state officials / Chief of power grid to be questioned In June, as Californians braced for a summer of rolling blackouts, television cameras captured allegations from former Duke Energy employees that seemed to pin the state's energy mess on power providers. The self-described whistleblowers told a legislative committee that Duke withheld power during the peak of California 's electricity shortage to boost prices, charges the company denied. But more than four months later and at a cost that could top $10 million, state-sponsored investigations into the energy crisis have yielded no civil or criminal penalties against power providers. In fact, some probes started to scrutinize energy companies are now targeting other big players in the California energy market: state officials. Investigators are looking into a range of accusations, from why the head of the state power grid helped open the flood gates to massive electricity price hikes to new complaints that the state department buying power is manipulating the market. Under subpoena, Terry Winter, who runs the California Independent System Operator, will be deposed today in the state Capitol. The new questions have broadened the scope of the investigations into who the real culprit is in the state's electricity crisis. "Who's the bad guy? The better question is who is wearing the white hat?" said Gary Ackerman, spokesman for the Western Power Trading Forum, a trade group representing generators. When California blackouts became a punchline for late-night comedians, several state agencies began investigations: -- Attorney General Bill Lockyer announced he was investigating price-gouging by generators. He convened a grand jury in June to discover whether generators had purposely withheld power to the market to drive up prices. -- The Senate Select Committee to Investigate Price Manipulation was created by the Legislature. Run by Sen. Joe Dunn, D-Santa Ana, the committee hosted the Duke whistle-blowers and issued a flurry of subpoenas for records kept by energy providers. -- The Public Utilities Commission also began looking into the market and into allegations that generators had idled plants at key times. All three investigations are continuing. The PUC has spent more than $800,000 on its review, Lockyer has $9 million to spend on his work and Dunn's committee is spending about $14,000 per month. Lockyer has said he is looking into complaints that energy consultants hired by Gov. Gray Davis had conflicts of interest. One consultant allegedly helped negotiate a long-term energy contract with an electricity provider he had recently worked for. The state's Fair Political Practices Commission and the U.S. Securities and Exchange Commission are also exploring conflict-of- interest charges that led Davis to fire five consultants. Dunn's committee is still looking into market manipulation by generators. But he has spent more time recently investigating the actions of state officials. Dunn wants to know why the head of the ISO, Winter, asked federal regulators on Dec. 8 to drop caps on the price companies could charge for power. Winter made his pitch to the Federal Energy Regulatory Committee without telling Davis or his bosses, the 26-person ISO board that had regularly voted for strict price caps. The committee quickly approved Winter's request, and energy prices began soaring. While ISO officials contend Winter had to kill price caps to keep generators interested in selling power to the state, Dunn is looking into whether Winter and the generators somehow colluded to drive up prices. ISO officials deny that Winter worked with generators to drop price caps. "It seems ludicrous that Terry Winter wouldn't tell his bosses that he was about to take the boldest step in ISO history," Dunn said. Dunn's committee also is probing recent complaints from generators that the state is manipulating the energy market. The state Department of Water Resources, which began buying power in January after cash-strapped utilities no longer could, is demanding exclusive information about the power market from the ISO, generators allege. The department also has refused to pay generators for electricity it's buying unless it's told what generators' costs are. That information could lead to one of the biggest buyers in the market -- the state -- with more data than other competitors, creating an unfair playing field, generators argue. While a DWR spokesman said the department is working with generators to address their concerns, the generators have asked federal regulators to step in. But Dunn said he'll investigate whatever group is wreaking havoc in the energy market. "If those allegations are true, we now have a market participant exercising an undue influence on the market," he said. "They're doing the same things the generators were accused of." PG&E Re-Evaluating New Construction of Pwr Plants - Execs LOS ANGELES -(Dow Jones)- PG&E Corp (PCG) is re-evaluating how much new generation it will build in future years due to declining market demand and the impact of utility Pacific Gas and Electric Co's bankrutpcy, company executives said on an earnings call with analysts Monday. "Previously we have said we will have 22,000 megawatts in 2004," said Tom Boren, President and CEO of PG&E Corp's National Energy Group unit. "That's still being evaluated so we can't give new projections, but it's likely to be less than 22,000 MW." The company will proceed with the construction of current projects worth 5,400 MW, and tolling arrangements worth 2,200, Boren added. "We are not cancelling development projects at this time, and we are also moving forward with construction of the North Baja (natural gas) pipeline," Boren said. The company's re-evaluation of how much generation it will build has more to do with the outlook of future market conditions than the condition of the company itself, Boren said. He declined to say if the company was reconsidering projects in a certain area of the country in particular. Boren made his statements during a conference call on the company's third-quarter earnings. As reported, the company's quarterly net income more than tripled, but earnings excluding items increased just 3.2% and missed Wall Street forecasts. Though the company expects to see an 8-10% growth in earnings per share from operations, several executives said that 2002 will be a "challenging transition year". Several controversial regulatory and legal steps needed to implement the utility's plan of reorganization under its Chapter 11 bankruptcy proceedings will be put to the test in 2002, said PG&E Corp Chair, CEO and President Bob Glynn. "It will be a transition year from our current organization to our post-plan-of-reorganization structure...There's not a member among us who thinks it will all be smooth sailing. The utility is already facing adverse regulatory decisions and the energy group is facing reduced forward prices for power ," Glynn said. The utility filed a reorganization plan in September that would transfer all the utility's transmission and generating assets to unregulated subsidiaries, then spin off Pacific Gas and Electric as a publicly-traded retail distributor of electricity and natural gas. One immediate challenge facing Pacific Gas and Electric is Tuesday's ballot measures in San Francisco to create a municipal power district. If the measures succeed, the utility would lose 8% of its customers. "The utility is strongly opposed to the ballot initiatives. If they pass, there will be years and years of litigation," said Chris Warner, regulatory counsel for PG&E. "The initiatives wouldn't affect the bankruptcy court's jurisdiction or schedule, however." The utility is scheduled to explain its disclosure statement on the reorganization plan before a federal bankruptcy judge Dec. 19. If the judge approves the statement, it will be mailed to creditors for a vote. If it passes muster, another court hearing will be held to confirm the plan. Creditors seem to favor the plan, and, therefore, the company isn't seeking any alternative, such as a settlement reached between state regulators and California 's other financially troubled utility, Edison International (EIX) unit Southern California Edison, a PG&E executive said. SoCal Edison's settlement of a federal lawsuit with the California Public Utilities Commission will allow it to bill its customers for $3.3 billion in debt and repay creditors using cash on hand. PG&E has filed a similar federal lawsuit against the commission claiming it has the right to raise retail rates to recover power costs. That lawsuit is on hold while the court determines how it interacts with a related decision made in bankruptcy court, said utility CEO and President Gordon Smith. Another pending matter for the utility is a determination by the Department of Water Resources of how much revenue it will need from the utility through 2002 to pay for power purchases. The DWR has been buying power on behalf of the state's credit-strapped utilities since January. Pacific Gas and Electric has been paying an interim price of 10 cents a kilowatt hour since March for that DWR power. "We're expecting a revised revenue requirement from the DWR as early as today," Warner said. "The last announcement on Oct. 19 was that the overall requirement had shrunk by $2.5 billion, so we expect the requirement will go down accordingly for each utility." No one at the DWR was immediately available to comment on the status of the revenue requirement. San Francisco to vote on public power SAN FRANCISCO, Nov 5 (Reuters) - After a year which saw California's energy system thrown into unprecedented turmoil, San Francisco votes on Tuesday on two proposals to establish a public power agency to take over the functions of struggling utility giant Pacific Gas & Electric (PG&E). The two ballot initiatives, Measure F and Measure I, aim to make San Francisco the latest city in the country to set up a municipal utility district (MUD) - a potential blow to PG&E, which still serves some 4.7 million customers in northern and central California despite having declared bankruptcy in April at the height of the state's power crisis. Backed by businesses ranging from garbage companies to telecommunications firms that fear they could also be targeted by voters eager to take charge of their own city services, Pacific Gas & Electric has spent more than $1 million in an aggressive advertising campaign which describes the MUD idea as unrealistic and inefficient. But supporters of the MUD proposals ranging from environmental activists to consumer groups say the time has come for San Francisco to fashion a utility district that is a nonprofit public entity rather than a dividend-paying division of a major energy firm. "The profit that is generated by the sale, transmission and management of electricity, is realized back into the rate structure," said Ross Mirkarimi, campaign manager for the group supporting the MUD proposals. "Our utility ratepayers in San Francisco will see lower rates in a very quick period of time while we move from being an abused renter of a neglecting landlord like PG&E to owning our own infrastructure." The battle over San Francisco's MUD proposals - which local pollsters say are running neck-and-neck - takes place after months of chaos as California's energy deregulation effort unexpectedly resulted in skyrocketing wholesale power prices, periodic blackouts, sharply higher consumer rates and financial crisis for the state's major utilities. RELIABLE, AFFORDABLE ENERGY Pacific Gas & Electric, a division of PG&E Corp. , declared bankruptcy in April after running up billions of dollars in unpaid wholesale energy bills. The utility continues to function, however, and has repeatedly said it intends to use the bankruptcy process to put its finances in order. The MUD proposal could threaten that plan. Under Proposition F, San Francisco would create a power agency run by a governing board, while Proposition I calls for San Francisco and the neighboring town of Brisbane to establish a municipal utility district with an elected board of directors. That board would then consider whether or not San Francisco should take over PG&E's power transmission and distribution system in the city, as well as the city's small generating facilities owned by PG&E and Mirant Corp . Supporters say a MUD would deliver reliable, affordable energy, pointing to existing municipal utility districts in Sacramento, Los Angeles and other California cities as examples of how public power can shield consumers from the increasingly wild swings of deregulated energy markets. Opponents of the measure say it would thrust San Francisco into a role it is ill-equipped to play - developing a new city bureaucracy and then sending it out to compete with big league energy players in the the fast-paced and often cutthroat world of the power markets. Unlike established MUDs, San Francisco would not only have to buy the city's existing power infrastructure - at a cost of anywhere up to $1 billion - but might also find itself jockeying for power without the benefit of long-term contracts which have kept consumer rates low in places like Sacramento. Despite the jitters in the business community, the MUD proposal is backed by a number of major state and local political leaders as well as organized labor. Passage of one or both of the MUD proposals Tuesday does not guarantee that San Francisco would see a public power system established any time soon. PG&E has promised a court fight against any attempts by the city to seize its power infrastructure by eminent domain, meaning the measures could end up tangled in lengthy legal argument.
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