STATEMENT OF LORETTA LYNCH
10/17/00
On October 4, Southern California Edison Company and Pacific Gas and
Electric Company each filed and served an Emergency Petition for Expedited
Modification of D.99-10-057 and D.00-03-058 regarding cost recovery after the
end of the statutory electric rate freeze, in light of current conditions and
price levels in the wholesale markets. Edison and PG&E seek a suspension and
modification, respectively, of the Commission's current interpretation of Public
Utilities Code Sections 367(a) and 368(a). The Commission responded immediately
by issuing a ruling requesting additional financial information from the
companies. The information will allow the Commission to evaluate claims to
investors and the media that recent power purchase liabilities have undermined
the financial integrity of California's utilities. The magnitude of these claims
imposes a responsibility on regulators to evaluate the utilities' financial
circumstances on behalf of utility customers and the state.
The utilities responded promptly. Now the Commission will review the
books, records and financial circumstances of the utilities to determine what
additional action is required to protect California's consumers and to mitigate
the effects of power purchase costs on California's utilities under today's
changed circumstances. However, while the financial information provided by the
utilities is an important start, it does not constitute a complete record. The
Commission cannot decide the issues raised by the utility claims until an
evidentiary record is developed that lets us analyze both the utilities'
financial considerations and the consequences for ratepayers. Today's energy
realities make clear that it is crucial to explore equitable solutions to this
problem, including how the Commission should revise the accounting procedures
and cost recovery mechanisms related to the Transition Cost Balancing Account
and the Transition Revenue Account. These approaches might include, for example,
whether the generating revenues that have been earned should be used to net out
operating losses. Commissioner Duque's Assigned Commissioner Ruling begins that
process today, which will be pursued diligently to a speedy conclusion.
In addition to the substantial reopening actions taken today, in my
view the basic assumptions underlying AB 1890 are ripe for reconsideration. This
legislation, enacted by the previous administration, was based on assumptions
about how the California energy markets would work in a restructured
environment. Those assumptions have not proven accurate. We should evaluate the
reality of California's energy markets and act to coordinate energy policy based
on today's facts, not theories, to serve the over-all public interest of
California's businesses, families and the California economy.
