Californian utility Pacific Gas and Electric (PG&E) is attempting to persuade the state legislature to let it transfer its hydropower assets to a new, unregulated company. However, its plan faces opposition from competitors and consumer protection lobbies.
The company wants to create a new company, transfer the assets to this company, then credit its ratepayers with $3.3 billion, the amount it claims the assets are worth. It would then sell power from the plants into the California market at the market rate instead of the state-regulated rate.
California relies heavily on hydropower for its electricity. PG&E, with 96 powerhouses and 94 dams on 16 river systems, is the largest private operator of hydropower in the USA. Many hydropower plants in the USA are operated by federal agencies such as the US Army Corps of Engineers.
Several competitors, including Enron, Calpine, and FPL Energy, have objected. They believe that if PG&E is to divest itself of the plants, they should be sold in the same way as the company’s fossil fuel power plants.
However, PG&E won support for its proposal from several large energy users by promising to use the proceeds from the transfer of assets to reduce stranded costs the company is currently claiming in a surcharge on consumer bills.
As part of its lobbying to see its asset transfer passed quickly, the company is asking the legislature to prevent the California Public Utilities Commission referring the deal to FERC. If the asset transfer proceeds, the company will commit itself to retaining ownership of the hydro plants for five years, after which it will be able to sell them without state approval.