Regulators To Respond To PG&E's "Declaration Of War" (KFWB/AP) -- The California Public Utilities Commission is expected to respond today to actions taken by the state's largest utility, which the PUC's General Counsel Gary Cohen characterized as a "declaration of war," according to wire reports. PG&E believes it should be exempt from state regulation, and has sought to derail a PUC investigation into whether its parent company illegally transferred millions from the utility before it filed for bankruptcy.

In its failed negotiations with Governor Gray Davis for a state buyout of its transmission lines, the utility also demanded it be cut free from state regulations preventing it from raising customer electricity rates.

And during last week's initial round of bankruptcy hearings, one of PG&E's first actions was to ask U.S. Bankruptcy Judge Dennis Montali for a temporary restraining order against the PUC, which had ordered PG&E to reconcile its debts in such a way as to prolong the rate freeze.

PUC President Loretta Lynch wants the commission to investigate whether PG&E's April 6 bankruptcy protection filing is enough of a threat to the PUC's regulatory authority to prompt more PUC involvement in the bankruptcy proceedings.

PG&E spokesman Ron Low says the utility should have been able to end the rate freeze last summer when it met a key requirement of the deregulation law by wiping out debts it incurred selling power plants.

The PUC maintains that the utility still hasn't met the requirement, and that the rate freeze should continue.

Low stressed that PG&E has complied with every requirement under the deregulation law and that the PUC's repeated investigations, audits and changing requirements have hindered the utility's attempts to climb out of debt.

The PUC has given PG&E until May 21 to review its finances back to the launch of deregulation, and combine two accounts the PUC set up.

One tracks the utility's profits under deregulation -- it had about $2.02 billion on January 31; the other reflects the utility's losses from its inability to fully pass along high wholesale power prices to those customers, which totaled $8.3 billion on the same date.

Combining the accounts would reduce the debt the utility would recover from its customers to $6.2 billion, the PUC said.

The Utility Reform Network, the San Francisco consumer group that pushed for the new accounting rule, says the combined accounts provide a much better picture of PG&E's actual debt.

PG&E calls the accounting change retroactive and illegal.

The PUC also has other business on its agenda Thursday.

Under orders from the PUC, California's cash-starved utilities have begun paying a key block of power generators for future electricity deliveries. But many small power generators have not resumed production. The PUC wants to know why, Commissioner Jeff Brown said Wednesday.

Commissioner Carl Wood wants to study what the PUC can do to force more production from "qualifying facilities" -- power plants that rely on solar, wind, biomass or geothermal power or natural gas to generate around a third of the state's electricity.

Despite recent payments from both utilities, about 3,000 megawatts of potential QF power remains off-line, the same amount as before the PUC acted, according to the state's grid operator.

Many QF operators say they can't afford to pay lenders, companies supplying them with natural gas, employees and operating expenses because of the more than $1 billion PG&E and Southern California Edison Co. still owe them for past electricity deliveries -- a debt they claim the PUC has not fully addressed.

San Diego Gas and Electric says it is current on its payments.

Brown said the PUC did not plan to discuss the design of the tiered rate increase, which will pass along recent electricity rate hikes of as much as 46 percent to customers of PG&E and Southern California Edison Co.

Consumers could see their bills rise as early as May 1, Brown said.

Lynch put out a statement late Wednesday, blaming inaction by federal power regulators as the reason SoCal Edison took a large write-off of debt.

"The company should not have to shoulder these liabilities and neither should its customers," Lynch wrote.

4.19.01, 7:20a

-- PHO (owennos@bigfoot.com), April 19, 2001

Answers

(AP) --

The PUC tabled a scheduled vote on whether the regulators should become more involved in PG&E's bankruptcy case. The San Francisco- based utility is challenging the PUC's authority in the case. The PUC now expects to take up the matter at a May 3 meeting.

4.19.01, 3:51p

-- PHO (owennos@bigfoot.com), April 19, 2001.