| Year | ALJ (1) | PeeveyAlt 2 | Brown(2) | Wood | Lynch(3) |
|---|---|---|---|---|---|
| 2003 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 |
| 2004 | 12.9 | 12.9 | 13.9 | 12.9 | 13.9 |
| 2005 | 12.7 | 12.7 | 13.2 | 12.8 | 11.9 |
| 2006 | 12.7 | 12.7 | 13.2 | 12.8 | 11.9 |
| 2007 | 12.9 | 12.9 | 13.3 | 13.0 | 12.1 |
| 2008 | 12.7 | 12.7 | 13.2 | 11.9 | 11.9 |
| 2009 | 12.8 | 12.8 | 12.0 | 12.0 | 12.0 |
| 2010 | 12.7 | 12.7 | 11.9 | 11.9 | 11.9 |
| 2011 | 12.7 | 12.7 | 11.9 | 11.9 | 11.9 |
| 2012 | 11.9 | 11.9 | 11.1 | 11.1 | 11.1 |
|
Net Present Value(4) Over 10 Years: |
82.3 | 82.3 | 82.3 | 80.5 | 79.5 |
These values are based on forecasts of PG&E sales and costs presented by PG&E in the CPUC proceeding, which include the proposed reduction in PG&E’s general rate case request. Adjustments were made to these forecasts to reflect the specific proposals contained in each alternate decision.
Whether each of these proposals are feasible and will result in PG&E becoming creditworthy in 2004 is in dispute. No conclusion has been reached on that issue.
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The ALJ’s PD allows for future modification by the Commission. No changes in the size of the regulatory asset or the rate of return are assumed to occur in this rate forecast.
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The Brown alternate did not specify how its proposed $96 million reduction regarding a gas hedging contract should be incorporated into rates. For this comparison it was assumed to apply evenly among the years 2004-2008. In addition, the Brown alternate indicates that if $217 million in PG&E Corp litigation costs are included in the basis for the regulatory asset, those costs should also be removed. The possible $217 million reduction is not reflected in the table.
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The Lynch forecast assumes that PG&E is not allowed to recover any of its foregone dividends and/or earnings of approximately $2.5 billion from 2001-2004 in subsequent years, whereas all other proposals allow PG&E to recover most or all of these funds to increase PG&E’s equity to meet creditworthiness criteria and to emerge from bankruptcy.
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Using a 9.1% discount rate equal to PG&E’s after tax cost of capital.
In addition, PG&E’s analyses failed to include a number of other sources of revenues for PG&E that have been identified. These other sources of funds are not incorporated into the forecasts presented above. These other funds include:
- Additional 2003 headroom of up to $300 million;
- A one time reduction in DWR costs of approximately $100 million;
- 1st Quarter 2004 headroom of up to $400 million;
- FERC litigation refunds of up to $800 million;
- AEAP incentive payments to PG&E in 2004 of approximately $100 million;
- Cash on hand of $250 million that should become unrestricted once PG&E is creditworthy.
These additional funds total to nearly $2 billion, or approximately $1.2 billion after taxes. With the exception of the FERC refunds and the extra 2003 headroom, the PSA and most of the alternates fail to address whether these funds will be used to perform one time reductions in rates in 2004, or pay down the regulatory asset, or be kept by shareholders as additional earnings.
The PSA and all alternates except the Lynch alternate call for FERC refunds to be used to pay down the regulatory asset and for additional 2003 headroom to be refunded to ratepayers. The Lynch alternate calls for all these funds, and any other unforecasted amounts, to be used to pay off PG&E’s debt in 2004, without the use of a regulatory asset.
Assuming $800 million in FERC refunds are obtained and used to write down the regulatory asset, and $300 million of 2003 headroom is refunded to ratepayers, the rates under the Peevey, Brown and Wood alternates for 2004 would be approximately 0.6 cents/kwh less than shown above. The remaining identified funds of up to $850 million would result in an additional one time 1 cent/kWh decrease in 2004 rates if it were all refunded to ratepayers in 2004.
