ORA report accuses Pacific Gas and Electric Co. of spending at least $434 million too much to buy electricity

April 29, 2003 — The Office of Ratepayer Advocates (ORA), the independent consumer division within the California Public Utilities Commission (PUC), issued its report finding that the Pacific Gas & Electric Company (PG&E) should have saved its electric customers at least $434 million between July 1, 2000 and December 31, 2000.

PG&E Co. immediately responded, protesting that the report was “the height of hypocrisy.”

ORA’s report, filed in response to PG&E’s application 01-09-033, highlights PG&E’s failure to respond appropriately to market information that was readily available as early as mid-1999–well in advance of the escalation of electricity costs in 2000.

If PG&E had established effective risk management of its electricity purchases, as allowed by the PUC, PG&E could have significantly reduced the effect of skyrocketing electricity prices during California’s power crisis, the report claimed.

“PG&E essentially did half the job it needed to do, hedging only 45% of its electricity needs, rather than the 80% level warranted by the circumstances. ORA recommends that the Commission deny PG&E’s request to pass this $434 million onto its customers,” said Regina Birdsell, ORA Director.

Responding to the report, PG&E Co. wrote, “It is the height of hypocrisy for the Office of Ratepayer Advocates to criticize PG&E for not pursuing greater hedging when the ORA initially opposed the company’s ability to hedge at all.

“Furthermore, as with the case of long-term power contracts, the California Public Utilities Commission (CPUC) itself, on numerous occasions, failed to provide clear guidelines regarding hedging the cost of electricity prices. PG&E’s actions were more than justified and saved customers approximately $600 million, despite opposition by the ORA.”

PG&E Co. said it would fully rebut the ORA’s charges and demonstrate that its actions protected customers. The utility urged the CPUC to reject ORA’s report.

ORA’s examination reviewed the historical prices, demand, reserve margins, hydroelectric generation, outage rates, public information on the adequacy of supply, ownership, price caps, NOx allowance prices and conditions, and natural gas prices. The complete report is available from ORA’s web site ( http://ora.ca.gov/proceedings/electric/er/atcp/030428_pgeatcp_01_ph2.htm).

ORA is an independent arm of the commission, created by the legislature to represent the interests of all residential and business customers throughout the state to obtain fair rates and reliable service. ORA’s findings have not yet been reviewed by the commission, and do not necessarily reflect the decision the commission will make in this proceeding. The commission will ultimately reach a decision on this matter later this year.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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