SAN FRANCISCO - Pacific Gas and Electric Company (PG&E) today requested the United States District Court to issue an order allowing PG&E to commence recovering its going-forward wholesale procurement costs immediately.

The issue presented to the Court is whether the California Public Utilities Commission (CPUC), in violation of the Supremacy Clause of the United States Constitution, may nullify federally-regulated tariffs that it ordered PG&E to follow in its purchase of electricity.

In its filing, PG&E asserted, "All of the principal participants in this regulatory drama, from the Federal Energy Regulatory Commission to the CPUC itself, have formally acknowledged that, as a matter of federal preemption, PG&E is entitled to recover these wholesale costs from its customers....The CPUC is required by five decades of unbroken Supreme Court precedent to allow PG&E to recover its federally regulated wholesale electricity procurement costs in retail rates..."

In order to provide electric service to its 4.5 million customers, PG&E has been obligated by law to purchase wholesale electricity in a dysfunctional market at prices that have skyrocketed by up to 1000% in the past year, while being compelled by the CPUC to sell that same electricity at retail rates that recover only a small fraction of its wholesale purchase costs. As a result, PG&E is now facing a financial and operational crisis that has left it on the verge of bankruptcy and has severely harmed the California energy market and California's overall economy.

Specifically, in seeking a Temporary Restraining Order, PG&E asked the Court to (1) order the CPUC to allow PG&E immediately to commence recovering its going-forward procurement costs (net of PG&E's generation revenue) in retail rates subject to any lawful retroactive CPUC prudence review and refund, (2) issue and Order to Show Cause why a Preliminary Injunction to the same effect should not issue and (3) set an expedited briefing and hearing schedule on PG&E's Preliminary Injunction Motion.

"Rarely has a more urgent plea for relief been brought before this or any court. PG&E is both captive to and victim of California's deregulated electricity market, a market described by government officials in terms ranging from 'disastrous' to 'apocalyptic," PG&E said in its papers.

Since May 2000, and pursuant to orders by the CPUC, PG&E has been forced to incur costs for purchasing electricity and ancillary services from the PX and the ISO that have exceeded PG&E's total electric retail revenues available for buying power by approximately $6.6 billion by the end of 2000.

"Absent immediate relief from this Court requiring the CPUC to allow PG&E to recover its wholesale costs and retail rates, California citizens and the businesses and industries that fuel the State's economy are likely to experience power outages with greater frequency and of longer durations than those that occurred over the last week," said Gordon Smith, President of Pacific Gas and Electric Company, in a statement filed with the Court.

In a case virtually identical to this one, filed in the U.S. District Court, Central District, Southern California Edison (SCE) obtained favorable rulings on most of the key points that PG&E makes in its underlying lawsuit: (1) that the CPUC is bound by the preemption doctrine known as the filed rate doctrine and (2) that the only issue for the Court is to determine whether and to what extent the CPUC might review the prudence of purchases of electricity under the Pike theory. Since SCE and PG&E were forced by the CPUC to buy all their electricity on the spot market from the PX, and since the CPUC has stated that, for several reasons, the utilities' purchases from the PX are reasonable and are not subject to prudence review, and since it refused over a period of many months repeated utility requests to enter into long-term contracts, PG&E believes it is evident that the filed rate doctrine applies to the costs incurred by PG&E while acting under the CPUC's edict.

PG&E's motion asks the Court, on an emergency basis, to order the CPUC to allow PG&E to recover in rates the true cost of the electricity it is purchasing on a going-forward basis so that PG&E can afford to buy vitally needed power for California. Without such relief, PG&E will be unable to continue to obtain electricity. PG&E also seeks an expedited hearing on its request for a preliminary injunction that would also allow PG&E to recover its past costs.