Competitive Suppliers Say PG&E Application Would Turn Ratepayers Into Source of Venture Capital

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December 7, 2010

Pacific Gas & Electric is seeking to turn ratepayers into a source of venture capital, the Western Power Trading Forum, Direct Access Customer Coalition, and the Marin Energy Authority (collectively, the competitive supply parties) said in a protest at the California PUC concerning a proposed ratepayer-backed investment in a firm specializing in commercializing solar technologies.  The Utility Reform Network and Division of Ratepayer Advocates raised similar concerns in their protests.

In Application 10-11-002, PG&E sought approval to increase electric rates and charges to collect $35.6 million over three years to provide partial support for the balance of non-federal matching funds under an application by SVTC Technologies, a for-profit entity, for an award of $98 million in federal funds from the U.S. Department of Energy (DOE) to construct a California solar photovoltaic (PV) manufacturing development facility.  In return for PG&E's financial contribution, PG&E will receive a financial interest in SVTC Solar in order to provide the potential for full reimbursement to PG&E's customers over the long-term.

"PG&E is seeking funding for what is in essence a venture capital investment," the competitive supply parties said.  

"However, PG&E is, or at least it is supposed to be, a public utility that procures and supplies electricity and natural gas to certain of the customers in its service territory and supplies distribution and transmission services to all customers.  However, by means of this Application, PG&E apparently wants to turn its captive distribution customers into venture capitalists, investing at risk $35.6 million into a new solar PV manufacturing facility in return for an unspecified financial interest in the company," the competitive supply parties added.

Costs would be recovered from all distribution customers.

"PG&E has not demonstrated a valid reason why ratepayers should make this 'investment' rather than shareholders of PG&E Corporation," TURN added, and the competitive supply parties agreed that any funding should be shareholder supported.

"[A] solar manufacturing line - however valuable to the U.S. economy - is outside the bounds of PG&E's normal business of electricity distribution.  PG&E has not made a showing of why it is appropriate or necessary for ratepayers to fund a private venture," DRA adding, stating that there is "substantial risk" to ratepayers from the investment.

"PG&E's Application has the potential to set a precedent that could plague ratepayers for years to come.  Quite simply, the issue here is the fundamental, appropriate role for a utility.  PG&E seeks through its Application to greatly expand the traditional and conventional role of a utility by taxing its ratepayers to serve as proxy venture capitalists for investments that should be made, if at all, by the utility's shareholders," the competitive supply parties said.

The competitive supply parties further said that direct access and community choice aggregation customers should not be assessed any cost of the investment, since it is related to generation service.

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