II. Background

In Decision (D.) 01-01-018, we adopted an immediate, interim surcharge for PG&E and SCE, subject to refund and adjustment.¹ This surcharge is in effect for 90 days from the effective date of D.01-01-018. As stated in that decision, the increase is a temporary surcharge to improve the ability of the applicants to cover the costs of procuring future energy in wholesale markets that they cannot produce themselves to serve their loads. We determined that this expedited action was necessary to fulfill our statutory obligations to ensure that the utilities can provide adequate service at just and reasonable rates. Emergency hearings were held in late December 2000 and additional hearings are planned for February.

In D.01-01-018, we state that we do not yet have the facts to evaluate the utilities' claims of their dire circumstances. We have called for an audit and must await the independent auditors' report. Moreover, we do not have all of the facts related to the parent companies, the utilities, the affiliates, and the flow of funds among these entities. The independent auditors will also consider these questions in their reports. We must consider the overall financial position of the utilities and will do so expeditiously.

Further, in D.01-01-018 we state:

We are very troubled by the utilities' assumption that ratepayers must bear the burden of significant rate increases without the shareholders sharing in the pain. The utilities and their shareholders have received significant financial benefit from restructuring thus far. For example, PG&E and Edison have each received the benefit of over $2 billion in cash proceeds from rate reduction bonds. As reported in the monthly TCBA reports, PG&E has received over $9 billion in headroom and other transition cost revenues and Edison has received over $7 billion in such revenues. As revealed in cross-examination of PG&E witness Campbell, disbursements from PG&E to the parent company, PG&E Corporation (PG&E Corp.) during the transition period were approximately $9.6 billion. Out of this total, PG&E Corp. issued dividends (both common and preferred stock) of approximately $1.5 billion. PG&E also repurchased stock in the amount of approximately $2.8 billion and retired approximately $2.8 billion of debt. PG&E recognized that market problems were beginning to occur in June of this year, but decided to declare a third-quarter dividend. PG&E did not consider establishing a contingency fund or retaining cash to cushion its risk, because it believed that "its generally conservative financial profile and financing practices would adequately provide cushion against . . . a reasonable range of contingencies." (TR: 409.)

Now that such contingencies are outside the reasonable range, the utilities turn to the ratepayers for relief. It is decidedly not business as usual and the utilities need to realize that ratepayers are not the only answer to their dilemma. For example, parties have only just begun to explore the ability of the utilities' holding companies to participate in the solution. While the cash on hand in the holding companies may be insufficient when compared with the going-forward costs of procuring power, we are convinced that other potential solutions should be explored. (Id. mimeo. at pp. 15-16.)