California PUC allows Pacific Gas & Electric to pledge receivables
The California Public Utilities Commission (PUC) Wednesday voted to allow Pacific Gas & Electric Co. to pledge its customers' monthly account receivables as collateral to insure gas marketers they will get paid for continuing to supply the financially strapped utility.
Pacific Gas & Electric, a unit of PG&E Corp., has said suppliers are threatening to shut off shipments without assurances they'll be paid. The company claimed it was down to about 10 days' worth of gas in storage.
The PUC rejected a proposal that would have allowed the utility to also encumber gas in storage. Commissioner Richard Bilas noted Pacific Gas & Electric had not sought such authority. In addition, the PUC specifically excluded any PG&E affiliated companies from participating in the order.
The order is scheduled to expire in 90 days or 15 days after PG&E's credit rating is raised to investment from junk grade status.
The PUC acted after the Bush Administration said it will not renew an order requiring suppliers to continue selling to Pacific Gas & Electric. The order expires Feb. 7.
In January, PG&E needed 3 bcf/day of gas for its customers, split evenly between homes and small businesses and large industrial users. The gas is also used to fuel California power plants.
PUC Pres. Loretta Lynch accused gas suppliers of "taking advantage'' of California's energy emergency and claimed the utility has been victimized by their "predatory practices."
The situation occurred because PG&E could not pay in advance or on delivery, a significant change in payment terms demanded by suppliers, according to CEO Gordon R. Smith. The company said it has exhausted its cash and credit because of the high wholesale electricity prices in California.
To cover the shortfall, Smith has said the utility is quickly depleting its gas in storage The company said it has been able to purchase only about 60% of its February gas needs.
If the utility is not able to obtain enough gas for residential and small business customers, PUC rules require the utility to divert gas from large industrial consumers, including power plants, to residential customers. Other noncore customers whose gas could be diverted include hospitals, military bases, and universities, the company has said.