Preliminary projection of 2005 electric rates

SAN FRANCISCO, Oct. 18, 2004 (PRNewswire-FirstCall) — Pacific Gas and Electric Company will ask the California Public Utilities Commission (CPUC) to consolidate a number of regulatory proceedings that affect electric rates. We will also provide preliminary projections for 2005 retail electric rates.

It is important to note these 2005 projections are estimates, and overall amounts will likely change. The projections are based on data as of August 31, 2004, and will be updated in December. The outcome of several pending regulatory proceedings will affect the final amounts and overall rates, which could be higher or lower as a result. For example, proposed decisions currently pending before the CPUC could significantly reduce the share of costs allocated to our customers for the power contracts the State of California entered into during the energy crisis.

Not included in these initial projections, but with the potential to change retail electric rates, is the approximately $50 million in savings that would be achieved if the utility refinances the Regulatory Asset established as part of the Chapter 11 settlement with the CPUC. (If the refinancing of the Regulatory Asset occurs after these electric rate changes are approved, we will ask the CPUC to lower rates by the amount that is saved.) Also, any future Federal Energy Regulatory Commission (FERC)-ordered refunds or settlements with power generators have not been factored into the projections, but could change retail electric rates.

Background

Earlier this year, the CPUC returned to setting PG&E’s rates based on the company’s cost of service. As part of this process, we are required by the CPUC to annually reconcile the accounts established to track utility-related costs and submit a projection for electric rates.

We are proposing to minimize the number of electric rate changes during the year by consolidating as many proceedings as possible and adjusting rates on January 1, 2005. We believe customers benefit from this streamlined approach, which provides greater clarity regarding 2005 rates at the beginning of the year.

The approach is not new. It was used by the utilities prior to 1998, when the rate freeze was implemented.

What the advice letter filing means

In our filing, we detail the decisions, proceedings and cases pending before the CPUC or FERC that impact 2005 electric rates. For example, in 2005, the amounts associated with the operation of the company’s generation facilities, including fuel and purchasing power will decrease by $55 million. Transmission and reliability related costs will increase by $191 million, and the amount needed for distribution is expected to go up by $115 million. In total, we project that our overall electric revenue requirement will increase by $315 million to approximately $10 billion for 2005. These are not new requests. This process consolidates a number of existing regulatory cases and decisions that affect 2005 electric rates.

Several of the areas where costs are increasing in 2005 are related to the company’s core business functions of buying power for its customers and ensuring the safe, reliable delivery of electricity, including:

— Transmission and Reliability Costs — $191 million increase for operating and maintaining the high-voltage transmission system and paying for reliability power contracts from the California Independent System Operator.

— Power Procurement — $65 million increase related to the company’s ongoing efforts to purchase power on behalf of its customers, including paying for power contracts the California Department of Water Resources entered into during the energy crisis, and environmentally friendly electricity generated by third parties.

— Distribution — $115 million increase for operating and maintaining the distribution system, providing 24 hour a day customer service, and meeting the electricity demands of a growing economy and new customers.

— Public Purpose Programs — $52 million increase for renewable energy sources, energy efficiency programs, and low-income assistance programs.

If the CPUC approves the change in the revenue requirement, rates will increase slightly for most of our 4.9 million electric customers, including both direct access and bundled customers. Our bundled average rate will rise from 12.76 cents per kWh to 13.15 cents per kWh, a 3.1 percent increase, beginning on January 1, 2005.

With this increase, the projected system average bundled rate on January 1, 2005, will still be lower than the system average bundled rate at the beginning of 2004. In March 2004, we were able to reduce rates by approximately $800 million, as we emerged from Chapter 11.

Under the proposal, electric rates for residential customers will increase by about 3.4 percent.

— Presently, the average electric residential customer uses 540 kWh per month and pays about $65.68 per month. With the changes, the average monthly electric bill will increase by $0.70 to $66.38 per month.

— An average electric customer using 875 kWh per month currently pays $124.72 per month. In 2005, that customer’s average monthly electric bill will increase by approximately $8.05.

The proposed changes will not apply to the nearly 700,000 residential customers participating in the California Alternate Rate for Energy (CARE) Program.

What happens next

After the filing, interested parties will have 20 calendar days to file comments with the CPUC. Then, the CPUC’s Energy Division will review and consider the Advice Letter and comments. In December, Pacific Gas and Electric Company will update the numbers, and the full Commission will have an opportunity to decide the issue before the end of the 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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