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Industry News

PG&E Offers Widely-supported Hydro Plan

LCG, Aug. 10, 2000--Pacific Gas & Electric Co. went back to California regulators yesterday with a new idea about what to do with the company vast hydroelectric system, and this time it had the backing of consumer advocates, business, labor, agriculture and water interests.

The company at first contemplated a transfer of the hydro assets to an unregulated unit of its parent holding company, PG&E Corp. When that plan bogged down, the utility filed a proposal with the California Public Utilities Commission for auctioning the facilities piecemeal to third parties. That notion raised a hue and cry from just about everybody because of its possible effect on the states river system.

The proposal filed yesterday, which returns to the idea of transferring ownership to a PG&E Corp. subsidiary, is a fresh approach, the utility said, and would supersede earlier filings. Signatories to the agreement include The Utility Reform Network (TURN), the Coalition of California Utility Employees (CUE), Agricultural Energy Consumers Association (AECA), California Retailers Association, Sonoma County Water Agency, and Tuolumne Utility District.

In a statement, PG&E said "power produced by these hydroelectric facilities will now be committed to the market during theperiods when the market needs it the most, thereby reducing price volatility caused by supply shortages. Additionally, the agreement returns 90 percent of any profits from hydroelectric operations to customers. This sharing of revenues will act as a natural hedge for customers against rising energy prices since, as market prices increase, so will payments back to customers under the agreement."

Nettie Hoge, executive director of TURN and more often that not something of a burr under PG&Es saddle backed the proposal. "A key component of the settlement is a proposed agreement with the California Independent System Operator that assures that power from the hydroelectric assets will not be bid into the energy market in a way that can raise power prices," she said.

According to PG&E, the settlement agreement:

  • Provides a revenue-sharing mechanism that returns 90 percent of profits from the hydroelectric operations to customers.

  • Establishes a market value of $2.8 billion for the hydroelectric system that can be used immediately to pay down ratepayer cost obligations.

  • Commits PG&E Corp. to establish a $70 million fund to enhance environmental quality, water quality, and recreational opportunities.

  • Commits PG&E Corp. to donate or protect through conservation easements approximately 140,000 acres of watershed lands for public use.

  • Honors all existing water agreements with downstream users.

  • Protects agricultural uses of the water.

  • Ensures the facilities will continue to be operated by a highly qualified union workforce.

The PG&E hydroelectric system has a generating capacity of 3,896 megawatts and includes 174 dams, 68 powerhouses, 360 miles of canals, tunnels, and flumes, and approximately 140,000 acres of watershed land. It provides an average of 5 percent of Californias electricity year round and up to 10 percent in the summer when the rivers are flowing and the air conditioners are turned on.

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