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PG&E's Hydro Workout: Can This Deal Be Saved?

For the utility, wresting its assets from PUC control is the real point.
Fortnightly Magazine - February 15 2001

Regulatory Commission).

Water Rights. The right to use water to generate power and the right to approximately 200,000 acre-feet of consumptive water for municipal, industrial, and agricultural uses.

Operations. Remote control switching centers, central service centers, fleet vehicles, communication systems, instrumentation, and monitoring equipment.

Plant Licenses. Transferable regulatory licenses for each facility, including 26 licenses from FERC (three unlicensed projects).

Site Permits. Permits, agreements, and authorizations for each hydroelectric facility.

Other significant impacts noted in the report include the potential effect on the more than 200,000 acre-feet of consumptive water rights supporting municipal, industrial, and agricultural uses-a hugely important issue in water-tight California. A variety of economic and social issues also are discussed, including effects on customers and ratepayers, the appropriateness of the auction's design, the effects of the auction on the electricity market generally, and the effect on PG&E's rate structure and accounts.

Public hearings on the EIR began in January and end in March; written comments were due Feb. 5.

Johanna Thomas, regional managing director in California for Environmental Defense (formerly the Environmental Defense Fund), is among those with strong opinions about the draft EIR and proposed divestiture. "We have been concerned all along about the wisdom of deregulating these assets," she says, "because ... there are severe potential implications for the environment by running them, as we say, 'pedal to the metal' in a deregulated market."

Another is Stephen Wald, coordinator of the California Hydropower Reform Coalition-a group including over 100,000 Californians representing sporting, environmental, and other interests. "It's less important to us what color uniform the owners of the dams wear than how the dams are operated," Wald says. "Even regulated retention does not maintain the environmental status quo. That is because so much of the is tied to voluntary and informal arrangements. If the state is interested in continuing these often beneficial practices, it will have to do something affirmatively. Our position is that regardless of who owns the system, whether it's sold off as a unit or in pieces, it's time for the state to consider whether the broader public interest is really being met on these rivers. One critically important aspect of this is to begin systematic collection of data about the impacts of these dams and powerhouses on the environment, something that is not now being done and never has."

Both Wald and Thomas share the opinion that divestiture of these assets is likely a dead issue-unless the plants are to be sold to the state.

For Now, Assets in Limbo?

PG&E's auction proposal remains alive at the PUC, but recently was supplemented by a rate stabilization plan filed by the company in December. As part of this plan, PG&E says it "... recognizes, given the current dysfunctional state of the energy markets in California, that the divestiture of its remaining generation assets should be delayed until such time as the wholesale energy markets are functioning appropriately and competitively." The plan goes on to say that PG&E hopes the supply shortage will be addressed within the next two years.

Under the plan, PG&E would