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PG&Es return exceeds 11.45% threshold
SSJID makes case against massive rate hike
The South San Joaquin Irrigation District is fighting PG&E’s record $1.101 billion rate increase request. - photo by HIME ROMERO
PG&E secured rate increases from 2007 through 2010 to replace 47,000 power poles.

However, data gleaned from the for-profit utilities’ own records show they only will end up replacing 13,000 power poles during the four-year period.

Now PG&E is asking for funds as part of its record $1.101 billion rate increase pending before the California Public utilities Commission (CPUC) to replace 15,000 poles that were supposed to have already been replaced.

The South San Joaquin Irrigation District argued before the CPUC  that part of the reason the work wasn’t done was PG&E was using the money to pad its profit margin and accelerate return to shareholders in such a manner it exceeded the state-imposed cap of  an annual return of 11.45 percent allowed on  PG&E’s investments.

Two previous rate hikes authorized PG&E to collect $94.1 million from ratepayers to replace 15,000 poles in 2007. PG&E reported however, that they only spent $29 million to replace 3,172 poles which meant the San Francisco-based utility may have used $65.1 million in ratepayer collections for things that the CPUC did not authorize.

“In other words, PG&E has requested funding in this application to replace 15,000 poles even though PG&E did not replace the 47,000 poles for which it received 2007-10 funding,” noted SSJID General Manager Jeff Shields in testimony before the CPUC regarding PG&E’s $1.101 billion rate increase request. “Had it been critical to replace this aging infrastructure, PG&E should have done so in 2007, 2008, 2009, and 2010 with funds awarded for that purpose.”

The SSJID board directed Shields to prepare for exhaustive expertise testimony before the CPUC on the belief that PG&E rate hikes are out-of-line for economic realities and reflect a quasi-public utility that isn’t operating in the best interests of the people of Manteca, Ripon, and Escalon. Their goal is to convince the CPUC to whittle back the requested amount.

Shields argued PG&E is putting profits, corporate donations and incentives payments to executive as well as non-union employees ahead of safety and reliability concerns in the $1.101 billion rate increase proposed to go into effect Jan. 1, 2011.

The SSJID provided the equivalent of 84 pages of testimony to the CPUC plus four times that amount in supporting data in a bid to prove that PG&E’s rate request is excessive at best.

The testimony’s key points included:

•PG&E is seeking authorization for projects that were already going to build using funds from subsequent rate increases.

•The revenue increase isn’t justified in light of the economic challenges facing PG&E ratepayers.

•PG&E’s use of its ratepayer funds to benefit its shareholders.

PG&E returns exceed maximum allowed

Responding to an inquiry from CPUC staff if PG&E simply ran out of money to do the work by underestimating the cost, Shields provided information taken from the utility’s corporate findings to refute that point.

The PG&E and other investor-owned utilities that are essentially granted monopoly status by the state are allowed maximum return on investment of 11.45 percent.

Yet PG&E documents show that in 2007 it enjoyed a 12.37 percent return or a $1.006 billion profit, as well as a 12.16 percent return in 2008 or a $1.338 billion profit. Final PG&E data wasn’t available to calculate the percentage of return in 2009 although PG&E reported earnings of $1.220 billion. They also have been making an average of $18 million annually in corporate donations plus increased returns to shareholders from $93.7 million in 2007 to $154.2 million in 2009.

“Given that PG&E did not undertake these expenditures, but had the resources to do so, it is difficult to understand how PG&E can justify a large increase in electric distribution capital expenditures as necessary except to ensure growth of rate base and increase shareholder returns,” Shields testified.

Shields also noted the PG&E rate application is asking to replace the poles at a unit cost that is 30 percent higher than in 2007 despite costs dropping due to the slowdown in demand for building and construction materials.

The SSJID also made other points against the CPUC authorizing the rate hike. They run the gamut from research and development costs collapsed into the electric distribution rate hike that have nothing to do with distribution but instead are for transmission lines and other environmental-related studies to ratepayers being charged “below-the-line” accounting expenses.

The SSJID has been locked in an eight-year struggle with PG&E to enter the retail power business in a bid to reduce rates by at least 15 percent across-the-board in Manteca, Ripon, and Escalon.

PG&E rates are among the highest in the nation for electric utilities.

Shields has run two other public utilities including the Trinity County Public Utility District that has been able to hold its rates steady for years while PG&E has steadily been escalating their own rates as many as three times annually.