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A rate increase is likely, but only the utilities benefit from adoption of the utilities' proposals. | dev33 |
The Commission needs to carefully scrutinize the utilities' claims and take a careful look at the level of increase required to maintain access to capital markets. | dev33 |
However, as expected, the utilities implored the Commission to jump the gun immediately. | dev33 |
The utilities want the Commission to declare an end to the rate freeze and raise rates on Jan.4. | dev33 |
No more divestiture. | dev33 |
The utility should keep the generating assets it retained, but the Commission should ensure that the assets' benefits are allocated equally among all customers. | dev33 |
One legislator recommended that the State buy the utilities' hydro assets, which would give the utilities the cash they need and give the state control over some generation. | dev33 |
Treat all customers equally and fairly. | dev33 |
The Commission should not create two classes of customers (e.g., large v. small; direct access v. bundled). | dev33 |
No customer group should be sacrificied to save another. | dev33 |
Be as narrow as possible/do as little harm as possible The immediate problem is the utility's cash/credit crunch. | dev33 |
As such, the Commission should do only enough to solve this very specific, immediate problem. | dev33 |
A modest rate increase is all that's required and the Commission should do no more. | dev33 |
At the beginning and the end of the hearing, the President of the Commission asked parties to be prepared (at tomorrow's hearing) to discuss whether the Commission could legally use its other, broad powers to raise rates without declaring an end to the rate freeze. | dev33 |
It seems that she seems some benefit in raising rates, but leaving AB 1890 otherwise intact untill the Commission can Marketers and generators are to blame for the problem Though not universally embraced, the theme came up repeatedly. | dev33 |
A few parties (e.g., the Unions, low income consumer groups, one PUC commissioner) called for complete re-regulation of the industry, returning the utilities to vertically integrated monopolies. | dev33 |
But they were the exception rather than the rule at today's hearing. | dev33 |
2. | dev33 |
Next steps There hearings were scheduled to end on Thursay, but now will continue through Friday. | dev33 |
Tomorrow, lawyers will provide "oral" arguments on whether the Commission must end the rate freeze in order to increase rates. | dev33 |
We will argue that it does not have to, and should not, go through the complex and controversial exercise of determing whether the rate freeze is over between now and 01.04.01. | dev33 |
We will argue that the Commission has the authority to raise rates without ending the rate freeze, and if it decides to raise rates, it should do so while keeping AB 1890's basic structure in place until a full and fair hearing of the issues is completed. | dev33 |
We are talking to other stakeholders to persuade them to take the same approach. | dev33 |
In terms of legal arguments, this is clearly a long shot, but one that seems worth taking. | dev33 |
After the oral argument, the utilities will present their rate proposals and "all interested persons" will have the opportunity to cross-examine the utilities (in short, tomorrow will also be a zoo). | dev33 |
When asked what the process will be for issuing a proposed decision and providing comments, the President of the Commission responded "we don't know, it's evolving." | dev33 |
In other words, the Commission is doing a poor job of ensuring that their Jan 4 decision is "appeal-proof." | dev33 |
Keep in mind that the situation remains extremely fluid and the trend is still toward ending the rate freeze on Jan. 4th. | dev33 |
We continue to aggressively offer alternatives to that possibility and continue to try to bring other stakeholders to our side. | dev33 |
We're doing everything necessary to preserve our appeal rights. | dev33 |
We can discuss further on the 10 AM (CST) call tomorrow. | dev33 |
Best, Jeff | dev33 |
Here is some info in advance of tomorrow's call. | dev33 |
will do. | dev33 |
will do. | dev33 |
I haven't received anything. | dev33 |
ah jeez, i guess this means that you made it back safely from s.d? | dev33 |
Today's hearing was dominated by : 1) many lawyers arguing over whether the Commission must declare that the "rate freeze" is over before raising rates, or whether the Commission can rely on its general constitutional and statutory authority to raise rates on an interim basis, without addressing the issue of the rate freeze, and, 1) an appearance by Ralph Nader. | dev33 |
The Legal Issue In general, our proposal seems to have gotten some traction. | dev33 |
Whether it sticks remains to be seen, however. | dev33 |
We proposed that: The Commission has the authority to raise rates without addressing the rate freeze issue. | dev33 |
The Commission will not have the facts it needs, and it won't have provided the due process necessary by Jan 4th, to address all the complex issues tied to the rate freeze. | dev33 |
And if it tries, it's likely to face a flurry of law suits, which is in no one's best interest. | dev33 |
For it's Jan 4th decision, the Commission should confine itself to determining whether, and if so by how much, to raise rates to maintain the utilities' access to capital markets. | dev33 |
(We've taken no position on whether there's a need to raise rates.) setting a hearing schedule to examine the "rate freeze" and all related issues thoroughly and methodically. | dev33 |
The utilities argued that the Commission must declare an end to the rate freeze; otherwise any Commission decision to raise rates would be easy to attack in the courts. | dev33 |
(In reality, the utilities want the Commission to end the rate freeze in order to assure lenders that the Commission will permit the utilities to recover going-forward procurement costs. Under the rate freeze, the utility is at risk for procurement costs that exceed the rate freeze.) In his presentation, our outside counsel offered numerous citations to past Commission decision and court cases supporting the Commission's ability to raise rates if it found it necessary to do so. | dev33 |
Many other parties agreed with our position. | dev33 |
A few parties said that the issue was too murky to make a call. | dev33 |
During questioning, both the President of the Commission (Loretta Lynch) and the presiding judge seemed to indicate that they believe the Commission has ample authority to raise rates without having to address the rate freeze issues. | dev33 |
The Ralph Factor Apparently, having lost the Presidential election, Ralph Nader's still looking for work. | dev33 |
He showed up at the hearings today and held a very lengthy news conference. | dev33 |
From what I could hear, he targeted all of his criticism at the utilities for being greedy, and at the Governor for being too ready and willing to bail the utilities out. | dev33 |
Even when thrown some soft balls about "out of state generators," Nader stuck to bashing the Governor and the utilities. | dev33 |
But I couldn't hear the entire press conference, so he may have said things that I missed. | dev33 |
The Next Steps The hearings that were scheduled to end today will now go into next week. | dev33 |
Tomorrow, the utilities are scheduled to make their case for financial hardship. | dev33 |
Customers intend to question the utilities very aggressively (as does the PUC). | dev33 |
The utilities will also have the chance to question the consumer representatives who filed their own proposals and analysis with the Commission. | dev33 |
On Tuesday, the Commission is likely to take up the issue of how big any rate increase needs to be and how much of the increase each customer group should shoulder. | dev33 |
More tomorrow on the call. | dev33 |
Best, Jeff | dev33 |
All: Please see attached materials from Steve Kean. | dev33 |
Ken Lay and Steve Kean met yesterday with the Governor of California and his policy director to discuss solutions to California's energy problems. | dev33 |
The meeting was very constructive. | dev33 |
Ken Lay and Steve offered some of Enron's proposed solutions and the Governor discussed the options he's considering. | dev33 |
We've been asked to provide--by Tuesday--feedback on his proposals. | dev33 |
The turn-around time is tight, particularly in light of the holiday. | dev33 |
We'll need your feedback by COB Monday. | dev33 |
If at all possible, if folks can group their feedback, comments and suggestions and foward them along to me, that would be very helpful. | dev33 |
If there is anyone else that you think ought to receive this information, please forward along. | dev33 |
Thanks very much for you help. | dev33 |
Best, Jeff | dev33 |
Thanks. | dev33 |
The Hearings The hearings have transitioned to the more traditional, courtroom-like environment, with lawyers engaged in detailed cross-examination of utility witnesses. | dev33 |
The hearing focused solely on the utility claims of financial hardship. | dev33 |
The hearings went from 9AM-5PM and only managed to make it through two PG&E witnesses--extensive, detailed questions on PG&E's cash management practices since restructuring started in 1998. | dev33 |
Questions to witnesses focused in particular on PG&E's use of cash for investment and financing activities over the past 2-3 years (e.g., dividend/stock repurchase activities, transfer of cash from IOU to parent and parent's use of that cash for investment activities). | dev33 |
Questions also focused on options other than rate increases available to the utility (e.g., liquidate certain assets of unregulated biz units, loans from parent, bankruptcy). | dev33 |
The commissioners and the ALJ have reacted in extremely hostile manner toward PG&E's repeated attempts to amend and add to their proposal as the hearings progress. | dev33 |
Questioning of PG&E witnesses will continue at 10 AM on Tuesday, followed by Edison witness. | dev33 |
Unclear when the hearings will end, though the Commission is scheduled to issue its decision on Thursday. | dev33 |
At this point, it seems very unlikely that the Commission will have developed the record necessary to do anything other than raise rates under its general ratemaking authority. | dev33 |
Outside the Hearing Intense negotiations between Governor's office and utility management continue. | dev33 |
Seems that the Commission/Administration is beating up on the utilities inside the hearing room in an attempt to soften the utilities up and gain some leverage in the negotiations taking place outside the hearing room. | dev33 |
Governor continues to try to bring consumer groups into the negotiations with utilities, but consumer groups continue to resist and continue to oppose any rate increases. | dev33 |
Governor seems to be attempting to set up a situation where the Commission absorbs the political heat for raising rates on the 4th, and the Governor follows-up with a more comprehensive set of proposals as part of his state of the state speech on the 8th. | dev33 |
Thanks for the articles. | dev33 |
Well, not quite in PJs, but yes, working from home, which is some consolation. | dev33 |
PG&E has said that a signficant share of gas suppliers have stopped transacting with PG&E due to credit risk. | dev33 |
Our exposure to PG&E is huge (both EES and ENA), so I wouldn't be surprised if we've stopped transacting with them until the Commission comes out with its decision on the 4th and we see how the ratings agencies respond. | dev33 |
I can find out first thing Tuesday morning. | dev33 |
And a very happy and safe new year to you, too. | dev33 |
Best, Jeff | dev33 |
Steve: I'm going to give you a call. | dev33 |
Few things: Got your message. | dev33 |
As you'll see from the document, I likely spent too much time over the weekend on the "what's in it for consumers" messages. | dev33 |
Since it was one of the the "to do" items, I figured that it should get some emphasis, but sounds like that may not be the case. | dev33 |
I've proposed a template for how to provide feedback on the Gov's specific proposals, using direct investment in power plants by the state as the illustrative example. | dev33 |
Let me know if you think it works. | dev33 |
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