PG&E Proposes Rate Stabilization Plan To Protect Customers From High Price Of Electricity

Fulfills Promise to Protect Customers From Dramatic Price Spikes; Without Proposal, Customers Could Face 100% Increases

SAN FRANCISCO - Pacific Gas and Electric Company today filed a proposal with the California Public Utilities Commission (CPUC) to stabilize electricity rates and protect its 4.6 million customers from the record-high wholesale prices being charged for electricity in California.

"From the beginning of this energy crisis, we promised to shield our customers from the rate shock experienced by San Diego residents this summer," said Gordon R. Smith, president and chief executive officer of Pacific Gas and Electric Company. "This proposal delivers on that promise, by holding the line on power costs our customers must pay, until state and federal officials can fix the broken wholesale electricity markets and start to repair the current supply and demand imbalance."

The utility is voluntarily proposing a five-year rate stabilization plan which will hold power costs much lower than current wholesale prices, and protect customers from very volatile wholesale prices. Beginning on January 1, 2001, residential and small business customers' wholesale power cost would be set at just under 6.5 cents per kilowatt-hour (cents/kWh), compared to the wholesale cost of 15.2 cents/kWh during November 2000. Under the plan, residential electric bills will average $63.50 per month, compared to more than $108.00 per month if the CPUC lifted the rate freeze without this plan in place. Current residential electric bills average $54.50 per month, under the rate freeze.

Without this rate stabilization plan, customers would be exposed to volatile wholesale electric prices that are currently more than 200 percent what they were just one year ago, and which skyrocketed to more than 450 percent above their previous levels during the past summer. The company estimates that once the rate freeze is lifted, customers will face an immediate average increase of about 100 percent, which could easily climb to more than 200 percent higher next summer, if wholesale prices are similar to their 2000 levels. Given the continued short supply and high demand, electricity prices are expected to continue to remain high for the foreseeable future.

"We are doing all that we can to reduce the unfair, unreasonably high electricity prices charged by out-of-state power generators. We are also working with regulators, policy makers, and our customers to find long-term solutions to this crisis," said Smith. "While those solutions are being developed, we are committed to shielding our customers, and the economy, from the dramatically high cost of electricity. Our rate stabilization plan offers reasonable rates now, and protection from dramatic price increases in the future."

Pacific Gas and Electric Company has not increased its customers' electric rates since 1993, and in fact, there have been two decreases during this period.

Nearly all of the increase in customer bills will go toward trying to keep up with the record-setting high wholesale cost of electricity. The portion going toward subsidizing energy conservation and low-income discount programs will increase as well, accounting for 10 cents of the overall bill increase.

Under the rate stabilization plan, Pacific Gas and Electric Company will offer its low-income customers a 25 percent discount off their electric bill, compared to the 15 percent discount they currently receive.

"If consumers were exposed to the full cost of power at this time, it would cause needless suffering, especially for low-income families and people on fixed incomes," added Smith. "We are doing everything we can to protect those who are least able to afford these high prices, by proposing they receive a 25 percent discount off their bill."

Since May 2000, the utility has amassed about $3.4 billion in uncollected electricity costs it incurred from buying power in the wholesale market for its customers. It has been able to borrow money to cover this cost, but is reaching the limit of its credit capacity. To keep prices down and help stabilize rates, the company will continue to act like a bank for its customers by financing the under collected amount, to the best of its ability. The proposed rate stabilization plan will very gradually begin to pay off these uncollected costs. The portion of the new rate that goes toward paying for the summer's high prices amounts to less than 20 percent of the total increases.

The company will also postpone receiving most of its share of profits from its generation facilities, and allow those funds to go toward easing the burden on customers for the first two years of the plan, until electric prices come back in line.

Under state law and CPUC regulations, the company is required to file end-of-rate-freeze tariffs with the CPUC once it collected its stranded costs, which occurred as early as August 2000, if not sooner. With this rate stabilization plan, the company is asking the CPUC to shield its customers, and California's economy, from the full damage of the high wholesale price of electricity.

Pacific Gas and Electric Company is working with regulators, policy makers, and its customers to develop solutions to the current wholesale energy crisis. The company has offered the following solutions to address the critical energy crisis facing the state:

Increase supply
  • Surveying substations to identify any that could accommodate small generation plants that could be used in times of very high demand.

  • Advocating for successful legislation that will allow the state to cut through bureaucratic red tape and site power plants more quickly, as long as they meet all environmental and local permitting requirements.

Moderate demand
  • Spending more than $125 million in 2001 on programs that emphasize the peak reduction benefits of energy efficiency.

  • In addition to new energy efficiency programs and services to both residential and business customers, the company has also made changes to several programs to capture more megawatt savings during times of peak energy usage.

Repair the broken wholesale market
  • Asking the Federal Energy Regulatory Commission to provide regulatory relief from the unjust and unreasonable power prices charged by independent power generators, including price caps, as well as refunds of unreasonable prices.

  • Asking the California Independent System Operator (CAISO) to adopt price caps and market restructuring mechanisms to try to repair - at least on a temporary basis - the broken wholesale power markets in California.

  • Supporting a successful legislative measure that asks the CPUC to investigate high prices and find equitable solutions to the crisis.

Fight for fair, reasonable rates for our customers
  • Using the limited authority granted by the California Public Utilities Commission to "hedge" against higher prices.

  • Locking in the lowest prices available for future electricity needs through the use of bilateral contracts with power generators.


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