PACIFIC GAS ELECTRIC – UTILITIES · Web viewMoving to slide 16, PG&E’s electric rate changes have been very complicated and not just for us here at PG&E but also complicated to

PACIFIC GAS ELECTRICModerator: Don Hall

13-09-05/1:45 pm ESTConfirmation #771159

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PACIFIC GAS ELECTRIC – UTILITIESElectric and Gas Energy Update

Moderator: Don HallSeptember 13, 2005

1:45 pm EST

Operator: Good day ladies and gentlemen and welcome to the Electric and Gas Energy Update conference call. At this time all participants are on a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. And at any time during the conference if you wish to submit a question via the web please type your question in the text box on the left-hand side of your screen and click on the submit button. If anyone should require assistance during the conference please press star zero on your touchtone telephone. As a reminder ladies and gentlemen this conference is being recorded.

I would now like to introduce your host for today’s conference Mr. Don Hall. Sir you may begin.

Don Hall: Well thank you and welcome to PG&E’s webcast. As indicated we’ll be providing an electric and gas energy update today. We certainly appreciate you taking time and hope you find our presentation useful. Just a couple of additional logistical comments, you are able to enlarge your viewing screen by selecting the tab enlarge slides at the top of your computer screen. And I also wanted to mention that we will be providing a survey immediately following the webcast that will allow you to provide comments, some input and hopefully some suggestions on how we can continue to communicate with you in the future. As indicated, we will be giving you an opportunity to provide questions throughout the webcast. We do have approximately 200 participants that were scheduled for the line today. Realizing that, we may not be able to get to all questions but we will do our best and in follow-up we will answer all questions through e-mail over the next few days.

We do have a number of customers who are still registering and being connected to the line so I’d like to start with a few general comments on PG&E while others are fully connected. First off, I want to mention that my name again is Don Hall I’m the--PG&E’s Manager of Corporate Account Services, I’ll be hosting our call today. We’re conducting this at our corporate headquarters in San Francisco. We have customers participating throughout PG&E’s service territory and many customers that are participating from offices throughout the United States. We also have a number of PG&E offices hosting customers throughout our territory. Our other primary speakers today will be Shawn Halvorson [ph] and Dan Pease [ph] who will be serving as our gas and electric rate experts.



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So for a few general comments on PG&E I want you to be aware that we’re celebrating our 100th year as a company. As we begin our next 100 years, we are committing to be recognized as a national leader in the energy industry. California continues to grow, energy demands and customer expectations also continue to grow and PG&E wants to grow with you. Our commitment is to lead the utility industry in the safe delivery of cost competitive gas and electric services to our customers. To ensure that we can accomplish this, PG&E has initiated a comprehensive transformation effort involving all of our business functions. The key elements of our transformation include first, operating more efficiently. Throughout our organization we are evaluating and streamlining work processes often using technology to operate more efficiently. Our recent proposal to install an advanced metering infrastructure and meters to all customers is an example of this effort. The benefits of these improvements should reduce our future operating expenses and lead us towards more cost competitive pricing.

Second, we’re finding clean and flexible energy sources for our customers. We are integrating energy efficiency, demand response and renewable generation into our procurement portfolio along with competitive bidding for other supply sources. We also continue to be supportive of customer choice through direct access and a new option community choice aggregation.

Our third key element of our transformation is in providing reliable service. PG&E recognizes that keeping the lights on and the gas flowing is critical to all our customers. We are committing to accelerate investment in the replacement and upgrading of our gas and electric system infrastructure to fully meet this expectation. And our fourth element is in innovating in the delivery of customer service and communications. We constantly are identifying ways to effectively communicate with our customers. This webcast is an example of how we are looking to provide valuable and timely information.

Ladies and gentlemen at the present time we’re having some trouble pushing the presentation, advancing it to you, so we’re going to take a minute and just try to solve our technical difficulties. And in any event we’ll begin again in a few minutes with the continuation of our presentation. We’re on the line to our Genesys folks that are helping us.

U/K Male: Sayed?

Operator: Yes sir.

U/K Male: Will you mute everybody for the time being?

Operator: All right sir.

U/K Male: We are not able to see the webcast (audio cut off).

Don Hall: Okay do it again.

Operator: Pardon me you have been connected back to your conference.

Don Hall: Great thank you. We have addressed our brief technical problem and are now ready to move on with the main portion of our presentation. I wanted to take an opportunity to



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acknowledge those who have just joined our presentation. My name is Don Hall I’m the Manager of Corporate Account Services, will be hosting our call today, and we are ready to begin with our first main presenter. Our first presenter will be Shawn Halvorson. As a brief introduction to Shawn, she has over 20 years of professional experience, initially working as a certified public accountant before joining PG&E Gas Transmission in 1991. In 1999 she began serving in her current role as Manager of Gas Rates. Shawn will be providing an overview of our gas system and gas rate expectations. Shawn.

Shawn Halvorson: Thanks Don. Good morning. Let’s turn to slide five the gas overview. Today I’m going to be talking to you about PG&E’s service territory, what comprises your gas bill, a little bit about gas supply and prices and about 2006 rate expectations. Go ahead and start with slide six PG&E’s gas service territory. In front of you, hopefully, is a map of California and this is – the PG&E’s gas territory is in the orange section of the map and the large black line running through California is PG&E’s gas backbone transmission system. PG&E is uniquely situated to access gas from several supply basins both to the North and Canada and to the Rocky Mountain Region and in the Southwest. As a result, PG&E is able to access the lowest cost gas to manage your gas bills. PG&E also uses storage to manage gas costs and as a hedging tool. PG&E serves about 20 percent of its winter demand through storage.

Let’s turn to slide 7. What comprises your gas bill today? PG&E provides two types of services for its gas customers. For core customers it provides a bundled service that includes delivered gas from the wellhead to PG&E’s local transmission system. In addition, PG&E provides a transportation only service to customers who wish to obtain gas through third party providers. The graph at the top shows PG&E’s different classes of service, small commercial, large commercial, industrial and electric generation and cogeneration service and the relative procurement costs, public purpose charge and transportation cost in a typical bill. Procurement costs are the largest most predominant color on this graph, hopefully red for you, and that cost is now about 70 to 80 percent of your bill. It used to be – about 10 years ago it used to be about a third of the typical bill for residential small commercial customers. Procurement includes the cost to purchase gas and deliver that gas, transport it through all of the interstate pipelines and deliver it into PG&E’s local transmission system. It also includes storage costs for PG&E customers.

The second line is PG&E’s public purpose program costs which are applicable to most classes of service except for wholesale, electric generation and cogeneration customers. These are costs of energy efficiency, demand [site] management, research development, demonstration and other low income programs. And then the last line on there, the blue line, is PG&E’s transportation costs and that is the gas transportation through the local transmission system, through the distribution system and to your burner tip. And this cost – this portion also includes other P&C and state mandated costs such as environmental and social programs.

Let’s turn to slide – to slide 8. This is PG&E’s average monthly large commercial gas rate over the last six years and this – this graph shows that gas prices forecasted for 2006 are actually creeping back up to the levels that were in effect during the energy crisis of the winter 2000/2001 period. It also shows that PG&E is forecasting somewhere above 80 percent of your procurement – of your delivered bill to be your procurement cost. PG – for its core bundled customers, PG&E changes rates monthly to reflect the new cost of gas and does not mark-up that cost of gas. This graph also shows



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that relative to the widely swinging procurement rates, PG&E’s transportation costs have remained relatively stable.

Let’s move on to slide 9. Slide 9 shows for an average small commercial customer the breakdown between PG&E’s present small commercial rate and the forecasted rate for 2006. Once again, transportation costs are remaining relatively stable but the total rate is expected to increase approximately 36 percent from $1.08 per therm to $1.47 per therm primarily due to the rising gas prices. This is – incidentally this forecast 2006 includes an annual average forecast of PG&E’s gas cost of about $8.85 an MMBtu or 88 cents a therm and that’s more of an annual average rate relative – which would allow you to compare a budget for your gas cost this year or 2005 versus 2006. But month to month as we saw in the graph on slide 8, gas prices tend to be higher in the winter months and lower in the summer months.

Turn to slide 10, gas supply and prices. As we’ve seen from the last couple of slides, the gas prices have fluctuated pretty wildly over the last few years and looking forward the gas market is likely to stay tight due to national supply shortages, a strong economy and high world oil prices. We’ve seen the price of crude and all other energies linked generally. So – so as crude oil has been going up and other oils have been going up natural gas has followed. In addition, the record high temperatures have reduced storage injections in the East Coast. PG&E’s storage I might add is right on track and actually we’re a little head – ahead this year regarding storage injection but gas prices are set nationally so this – anything that’s going on in a national level will affect the price that PG&E pays and that you ultimately pay for gas. As of this week, we’re right in the middle of our tropical storm season and we’ve already seen some pretty significant effects of the last few storms including the most significant one from Hurricane Katrina. And so there’s – this is causing a lot of uncertainty in the market. The damage reports from Hurricane Katrina are still pending, but that area in the Gulf is responsible for such a significant portion of the total gas production in the U.S. that there’s a lot of concern that this may be a repeat or even a worse situation than the 2004 Hurricane Ivan.

As of yesterday of the about 10 or so, 10 to 12 BCF’s per day of gas that’s produced in the Gulf of Mexico, approximately 3.8 BCF is still shut in where the production facilities are unable to produce the gas according to the Mineral Management Service. This is putting an upward pressure on price. It looks like as of yesterday gas prices are still about 84 cents per Decatherm higher than they were prior to Hurricane Katrina and the prices for winter gas are looking to be really high. Last year we were looking at about a $5 per Decatherm or $5 per MMBtu price of gas and this summer it was looking to be about $10 and now it’s actually looking to be more in the $11 to $12 range for gas. So bottom line, Hurricane Katrina has disrupted the supply and demand balance even further and at this point there’s just a lot of general uncertainty as to where winter prices are going to go. They were heading up before the hurricane occurred and now there’s – this is even creating more uncertainty in the marketplace.

Let’s turn to slide 11. Slide 11 is a graph of the NYMEX forward curve and this just shows how gas prices are linked all around the nation. The highest curved place is the NYMEX which is set in the Henry Hub which is in South Louisiana. And then the lower three lines are the price of gas at – in Canada, at Diago [ph] and PG&E Citigate which is delivered into its local transmission system and the Southwest San Juan net forward price. All prices are correlated. Prices are set nationally. And PG&E actually is part of a Western market so we actually have a separate supply and demand balance. But as the



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prices are – as demand grows and the prices of all energies are linked and so we’re bearing the brunt of these price increases on a national level.

Let’s turn to slide 12 and get right down to what is – what are our expectations for 2006 gas rates and what is driving the increases? Generally the story for your gas bills next year are going to be wrapped into your gas price, that’s the biggest driver for PG&E’s bundled service. We’re expecting about a 29 percent increase in small commercial rates and 35 percent increase in large commercial rates which is shown on the bottom of this page. And then I’ve gone ahead and broken down – and these are expectations at this point yet, these are in no way final we’re still a few months away – but I’ve broken down at this point PG&E’s best estimates for where we think these – these rates will be for next year. And the majority is of course in your gas procurement costs. In addition we’re seeing some small increases due to public purpose programs and social and environmental costs and PG&E’s distribution system. For non-core transportation only customers where PG&E provides the transportation only service and they purchase their gas from third party providers, there is – the biggest driver in your rates for next year is a large rate credit that’s in rates in 2005 that will be coming out in 2006. So as a result of removing this credit the rates are going up about – on a net basis we’re expecting about a 25 percent increase but the majority of that is just simply the removal of these credits that were in effect for 2005. In addition, for non-electric generation cogen customers we’re expecting increases in public purpose program costs, social and environmental costs and self-generation incentive program costs.

So that wraps up the 2006 gas rate portion. I’m going to I guess open this up for questions now and go back to Don.

Don Hall: Great thank you Shawn. I want to remind participants on the line that you do have an opportunity to submit questions and we have received a few questions from the field so we will go ahead and address those at this time.

Jennifer: Yes we have a couple of questions about third party gas supplier. Is it likely they can beat PG&E this winter and how big do you have to be to find third party supply economical?

Shawn Halvorson: Do you want to address that? I’m going to turn this question over to Jerry Miller who is our expert in this area.

Jerry Miller: Hi I’m Jerry Miller I manage the core aggregation program to manage the suppliers that actually provide this service to you. All customers have choice and can – you can find a supplier at www.pge.com/gaschoice. There are about 11 suppliers in the market right now. Those suppliers have a similar set of buying capability that PG&E has, they use the same pipelines they use the same market that we do. Whether they are able to beat our price or not we don’t know we don’t monitor their activity in terms of price. What we know is that they can offer some billing options and some pricing options that PG&E currently does not offer and they have been the choice of about 10 percent of our commercial load to date. So it’s something that we encourage people to look into, to look to see whether those offers are better for your business than the PG&E offering, but we stand ready as a – as a supplier as well to offer the core procurement service and to get the best price that we can every month.

Shawn Halvorson: Thank you Jerry.

http://www.pge.com/gaschoice



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Don Hall: Another question from the field.

Jennifer: Could you address the impact of the rate project on cogen systems? What is the social and environmental rate category and why is the increase so high for cogen?

Shawn Halvorson: Yeah social and environmental cover natural gas vehicle expenses and hazardous substance mechanisms which are just general costs that PG&E – they’re mandated by the state and they are – improve the environment and PG&E has just passed on – the reason they’re so significant for cogen is that the – if you look back a few slides earlier the cogen bill on slide 7 – the cogen rate is actually one of the lowest rates that PG&E provides. So when you pass the same cost on to an industrial customer, a commercial customer and a cogen customer it has a bigger impact in the cogen bill so that’s why they’re seeing a larger increase from those – those costs.

Jerry Miller: I had a further follow-up question on the question about suppliers. We’ll provide – after this – after this call, we’re going to provide some written material to summarize the questions that have been received and some of the answers that we may not get to even in this call. On that, I’ll repeat the access to the suppliers. Just to say it one more time though it’s www.pge.com/gaschoice, one word.

Don Hall: I think that concludes the questions that we had received from the field, at least the ones that we’re going to be able to address at this time and wanted to move on with the electric portion of our presentation. As mentioned early, Dan Pease is our presenter. As a brief background, Dan has been with PG&E for 27 years in the rates and tariffs department since 1989 and is currently the Manager of Electric Rates. Dan do you want to go ahead?

Dan Pease: Thank you – thank you Don. This morning we’ll give you a quick overview of our electric rate projections for 2006. We’ll summarize briefly the PG&E’s electric service territory, the components of your electric bill and then we’ll go into the electric rate expectations for 2006 and discuss that in some detail.

We can go to slide 14. This is a slide of PG&E’s electric service territory particularly for the benefit of those customers who are calling in from out of state. PG&E’s electric service territory extends from Humboldt County in the Northwestern corner of the state down to Kern County in the Southeastern corner of the state and is adjacent to Southern California Electric Service territory.

Moving to slide 15, this slide depicts the components of electric bills. In general, PG&E provides both bundled and direct access options for customers. For bundled customers would pay the generation component, generally speaking, and DA customers pay non-generation components plus a direct access cost responsibility surcharge in addition to the cost of the generation from their energy provider. In 2006 we expect changes to all these components of rates in all these major categories and it’s those changes now that we’re going to talk about in a little bit more detail.

Moving to slide 16, PG&E’s electric rate changes have been very complicated and not just for us here at PG&E but also complicated to explain to our customers. For example, while there are relatively few unbundled components on PG&E’s bills, the revenue components of – there are roughly 40 different revenue components that are aggregated to produce the rates that are used to drive the unbundled components on customer’s bills. And those components can change at different times during the year.

http://www.pge.com/gaschoice



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The changing of those components however is a function of the regulatory environment and so while the presentation on gas dealt with current gas issues, this electric rate discussion really goes more toward regulatory events.

We will try to focus on what we believe is important to you in this presentation, however one of the key focuses of the presentation is a filing PG&E recently made it’s called the Annual Electric True-Up Filing and it is a key filing for rates effective on January 1, 2006 and will be a key point of discussion in this presentation. If you could go to slide 17. The account man – your account managers have been provided with information underlining this rate change. The filing itself is also available on PG&E’s website and can be accessed if you want – after – if after this presentation is complete you would like additional information. At a high level, PG&E’s annual electric true-up filing has two main components. The first component is changes in the overall dollar amount that PG&E intends to collect in 2006. PG&E in its AET filing had requested a $599 million increase over revenues at current rates. This equates to about a 6 ½ percent increase for bundled customers, increasing the bundled rate from about 12.8 cents per kilowatt hour to 13.6 cents per kilowatt hour. The second component of the AET filing is PG&E’s settlement in phase two of its 2000 GRC. PG&E phase two cases don’t address the overall rev – level of revenue but actually address the way the revenue is allocated between the customer groups, and we’ll talk about that a bit later. So combined, the 2006 AET filing addresses both the changes in overall revenue as well as the allocation of that revenue between customer groups.

Moving to slide 18. Slide 18 is a summary of the revenue changes PG&E expects in 2006 that is filed in its AET filing. In general, a revenue requirement is a dollar amount approved by the commission for recovery in rates. This table shows the revenue requirement categories on the left. The revenue change shown on the right – results from the change to revenue requirement and is the increase over current rates required to collect the revenue requirement. The AET filing includes all pending and proposed revenue requirements expected for January 1, 2001 and as we’ll discuss in a few more minutes its illustrative in nature because of the uncertainties associated with that filing.

In this table the revenue changes have been aggregated at a fairly high level to facilitate your review. Of particular notice here is that some components of rate are increasing and others are reducing, are going down. In general, generation components paid by the bundled customers are increasing. These are offset only – but only to a partial degree by reductions in rate components that are paid by all customers. As a result, and we’ll see this more in the slides later on, bundled customers generally receive an increase and direct access customers generally receive reductions.

Going to the next slide, slide 19, there are uncertainties associated with the AET filing. The first major uncertainty is that as I mentioned earlier the AET filing includes all pending requests before the commission. PG&E won’t implement rates on 1106 without commission decisions with respect to each revenue requirement change that it’s proposing here to implement. The AET consolidates a number of cases where decisions are expected by FERC or the CPUC before the end of the year. So in order to make these changes on 1106 decisions in most cases must be rendered by the end of the year. Decisions that we expect by the end of the year include the 2006 DWR revenue requirement case, the 2006 fuel and purchase costs for PG&E, PG&E’s attrition, cost of capital, energy efficiency applications, demand response applications and several others. So you can see much of what we have in the AET filing is still pending before the commission and our ability to



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put it into place on January 1st will depend on the commission issuing decisions in those cases in a timely way.

Don Hall: Okay Dan thanks. At this point we do have some questions that have come in from the field. I think it would be a good time to take a break in your presentation and see if we can address a few of the incoming questions.

Jennifer: Yes, do you anticipate additional rate increases in 2006 due to the high prices of natural gas we are now seeing?

Dan Pease: PG&E’s forecasts for revenue requirement that were included in its AET filing had assumed gas prices that were current as of the filing date. However, they did not include the trend of continuing increases that we’ve seen since or the effects of Katrina. PG&E is evaluating the effects of the gas market on electrical prices now and expects updates provided – will be provided in both the DWR revenue requirement proceeding as well as PG&E’s fuel cost proceeding. Assuming those go forward, there may be price adjustments to reflect some of the gas market changes as early as January 1, 2006. We are in a state of currently analyzing what those effects will be and haven’t fully come to grips with how rates will change only that these revenue requirements would be updated in future filings before the end of the year. We would intend to keep you updated on changes that occur and ask you to bear with us as we struggle through that as well.

Don Hall: Great thanks Dan. I believe we do have some additional questions from the field.

Jennifer: Yes, – what does PG&E forecast for the phase out of the DACRS or the direct access customer responsibility surcharge?

Dan Pease: Direct access customers pay the direct – the cost responsibility surcharge and that surcharge has been capped by the public utilities commission. As a result, an under-collection accrued to DA customers that would need to be paid off over time. In order to determine when that payoff will come, the commission has to actually determine what the under-collections are for 2001, 2002, 2003, 2004 and so on. The commission has only determined what the under-collection for 2001, 2002 and has estimated that value for 2003. Until they determine the actual under-collection for the past years it will be impossible to determine when that under-collection would be paid off. Having said that, just briefly the commission is in the process of working on that problem and I know that DWR’s consultant Navigant has been working in the workshop forum with participants of that case to try to bring those issues to close.

Don Hall: Thanks Dan. I believe we have one more question from the field we’ll address at this time.

Jennifer: Yes, how much of PG&E’s generating capacity or procured electricity generation is fueled by natural gas?

Dan Pease: About 40 percent of PG&E’s electric supplies is fueled by natural gas so it is a very important component in our revenue requirements going forward.

Don Hall: Okay Dan I think we’ll go ahead and continue with the remainder of your presentation now.



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Dan Pease: Thank you Don. One thing to add just briefly on slide 19, perhaps two things, first, the balances in these accounts will be updated by the – to reflect year-end balances by the end of this year, these accounts meaning the fuel cost accounts, and that those updated balances will be revised in December and the proposal is to put those into rates in 2005, this is an additional – I’m sorry 2006 – this is an additional uncertainty with regard to the revenue requirements that we’re showing in the annual electric true-up proceeding. And one item that we’ve failed to mention that is of some interest to customers, is that the revenue requirements associated with the energy recovery bonds do reflect energy supplier refunds to the tune of approximately $380 million.

So moving onto the next slide, we’re going to start the discussion of PG&E’s – or the settlement in phase two of PG&E’s 2003 general rate case. This proceeding was delayed several times and only has recently been litigated. PG&E entered into a settlement with the participants in that case that we believe has a positive affect for our business customers. By itself, as I mentioned earlier, phase two does not affect the overall revenue levels but reallocates the revenue among the customer groups and revises electric rates. In general, the stance PG&E took in the phase two case was the residential class was not paying its fair share of costs. There was a general agreement that that was the case and as a result the settlement generally results in larger increases for the residential class as compared to the non-residential class. PG&E implemented the first phase of that settlement on June 1, 2005 when in implementing the DWR power charge revenue requirement the reduction went to the non-residential customer groups leaving the residential rates pretty much unchanged. Similar benefits are reflected in the AET filing with regard to additional revenue requirement changes.

PG&E—[indiscernible] has provided summary level revenue allocation summaries for direct access and bundled service customers on the next two pages. These are illustrative based on the uncertainties associated with the revenue requirement changes that we talked about earlier as well as receiving a decision in PG&E’s phase two case by the end of the year. As you can see on slide 21, the residential class is receiving on average a 10.8 percent increase, bundled rates are going up but generally at a level lesser than the system average increase for the non-residential group. As we mentioned earlier, one of the key drivers is generation related increases that go substantially to increase bundled customer rates. Going to slide 22, direct access service results are shown here and in general direct access rates are going down due to the reductions in some of the components paid by the direct access customers.

With that, are there any questions related to the phase two information?

Jennifer: Yes we have a question. Taking the uncertainties that you just discussed, such as gas prices and the DACRS, what would you recommend a large commercial customer to project for rate increases for bundled and DA accounts for 2006?

Dan Pease: The question is what would we project for that customer to do or--?

Jennifer: What would you recommend a large commercial customer to project for rate increases for 2006?

Dan Pease: Well our rate projections are, to the extent that we can provide them, are provided here we really can’t recommend a choice of direct access or bundled service.



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Jennifer: We have another question. At the end of the presentation please elaborate on what communities are moving forward with choice aggregation. Also, is PG&E planning to change the criteria for categorizing customer accounts between small and large commercial?

Dan Pease: With regard to community choice aggregation, I believe that the City and County of San Francisco has been a key advocate of community choice aggregation. I’m not sure if there’s somebody in the room who would like to comment on that or not.

Don Hall: Yeah we’re contemplating an answer to see if we have a list of other communities. There have been a number of communities throughout California and PG&E service territory that have expressed interest in community choice aggregation and – but we do have a representative in the room that has more specific information that will provide a few points of elaboration.

Calvin Yee: My name is Calvin Yee and I sort of administer the direct access and upcoming community choice programs. As Don mentioned, the – there are many communities in the State of California that are currently interested in community choice. However, as you may be aware, the CPUC is currently holding proceedings to determine the final rules and rates under which that program would operate. And so that ruling is expected currently by the end of the year and based upon the rules that are – that will be in place by then, he’ll assign – perhaps a number of communities will decide whether or not they want to proceed with community choice aggregation within their community. And so for more information about that you can probably check the commission’s website for a lot of those documents and some of the discussions that are currently surrounding community choice and some of the issues related to that.

Dan Pease: And Jennifer what was the second question?

Jennifer: Yes, it was, is PG&E planning to change the criteria for categorizing customer accounts between small and large commercial?

Dan Pease: No its not.

Don Hall: Okay – okay Dan – oh we do have one other question.

Jennifer: Yes, do you know what Proposition 80 is and what is PG&E’s position?

Don Hall: Okay Jennifer thanks, I think I’ll go ahead and take a stab at that. Proposition 80 is on the November ballot maybe more commonly known as the turn initiative and it has components that would return the procurement responsibilities and future generation within the State of California to the utilities and would effectively eliminate direct access. Specifically on Prop 80 or any other initiative PG&E has not taken a public position as of yet. Certainly in my opening comments I talked about our general commitment to allow customer choice and PG&E continues to be supportive of that and has been a proponent of an open competitive bid process for future supply sources in California. So while we have not yet taken a formal position on Prop 80 our general thoughts on some of the key issues within Prop 80 are publicly known and as a company we are continuing to evaluate our position and we’ll hopefully have a position on this key proposition prior to the election.



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Dan Pease: With that, one more slide on the electric presentation, if we can go to slide 23. After – excuse me – other than the changes on January 1, 2006 PG&E does have several rate changes planned that we’d like to make sure our customers are aware of. The first one will be filed actually in the next day or so and is a true-up to the energy recovery bonds. This will be filed approximately September 15th for an effective date of October 1, 2005. The rate change will be 6/100 of a cent increase for all customers responsible for paying the energy recovery bonds. This will amortize an under-collection in that account over three months so that the intent is that it would actually be removed from rates on January 1st. This true-up is required as a result of a sales variation – a forecast sales – actual sales variation compared to forecast.

Second item is PG&E’s Transmission Owner 8 filing. PG&E filed transmission costs at the FERC for approval and then puts those rates into place. PG&E filed a TO 8 application on August 1st and expects that a likely effective date of March 1, 2006. PG&E’s TO 8 increase is about $107 million and is for the costs – for recovery of costs for transmission system upgrades. We will – are also expecting a small transmission rate change on April 1st for the transmission access charge balancing account. We have not tried to estimate that at this point, it would be filed before February 1, 2006 for an effective date again of April 1, 2006. And finally, PG&E has requested a revenue requirement change for automated metering infrastructure of approximately $77 million and that, if it’s approved by the commission, would go into place on July 1, 2006.

So with that, that does conclude the electric portion of this presentation.

Don Hall: Well thank you. I’d – at this time I’d like to thank both Shawn and Dan for their presentations and we’ll look to open up the phone lines if – Sayed if you can give some brief instructions on how participants could ask verbal questions and also the continuing opportunity over the remaining minutes of the webcast if you would like to type in questions we will still be reviewing those.

Operator: Thank you sir. Ladies and gentlemen if you have a question at this time please press the one key on your touchtone telephone. If your question has been answered and you wish to remove yourself from the queue please press the pound key. Again if you have a question please press the one key on your touchtone telephone.

Don Hall: Okay while we have participants in the field contemplate what questions they may want to ask, I do want to just cover slide 24 if we could move to that. Really is thanking you for participating today. Making you aware that our PG&E Account Managers that work directly with our large customers can provide a number of services certainly in understanding the various rate options and providing rate analysis to ensure that you’re on the most cost competitive rate. We also provide audits that evaluate your facilities and look for energy efficiency and demand response opportunities to operate your facilities as cost effectively as possible. We have rebates and incentives for energy efficiency that helps in [indiscernible] equipment within your facilities and demand site management programs that assist you with taking advantage of critical peak time reductions to help lower your overall costs.

I also would like to mention that we will be providing a survey at the end of the webcast. Greatly would appreciate your comments and feedback and look for opportunities to communicate further messages with you in the future. At this time we will look to see if we have any participants in asking questions.



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Operator: Our first question comes from Kevin Kalinowski.

Kevin Kalinowski: Yeah I had a question on the DA – the direct access cost responsibility surcharge. Just in general, and I understand the comment about the under-collection, but aside from that how long does that – would we expect to see that on our PG&E bill?

Dan Pease: This is Dan Pease, the – we would expect that the direct access cost responsibility surcharge will actually continue for some time because it collects certain components that do continue over time. For example, it collects CTC which PG&E expects to go over time, it collects the DWR bond charge which would also be collected over time, it also collects the energy recovery bonds which will go a period of eight or nine years. So those things are part of the direct access cost responsibilities surcharge that will continue. The aspect of that – of the CRS that would be terminated in time is the DWR power charge portion of that rate and that is the piece that is uncertain in terms of when it would expire and again that does depend on first the CPUC telling us what the under-collected amount for DWR power charges is, and then how fast the DWR power charge can be repaid under the 2.7 cent cap. So again it’s being worked on. We really don’t have an estimate that – that would be useful in light of the commission doing work on it now.

Kevin Kalinowski: Okay well that helps. So in general what I’m hearing is, you know, it’s like 10 years, but what percentage is that power cost? Of the 2.7 cents roughly give me a feel for how much of that is this power?

Dan Pease: I’d like to actually respond to that in an e-mail where we can actually give you the numbers.

Kevin Kalinowski: Okay that would be – yeah that would be great. Yeah because I mean my impression was that that – that because those bonds had to be paid back, you know, I had always assumed it was like a 20 year thing, you know, it was going to be there for ever. And so I just – and today’s presentation that was the first time I really picked up that it may go away or at least a portion of it may – may – it may get smaller a little bit. So – no that’s great that answers my question.

Operator: Our next question comes from Barry Abramson.

Barry Abramson: Hi, first I’d like to thank you I think the presentations were great and very helpful. I wanted to hone in a little bit more on the electric rate projections because as someone who is trying to budget for utilities for next year and have to turn the budget next week. On the gas side, you know, it seems like you’ve got some percent increase expectations. On the electric side we’ve got the percent changes based on what’s being filed now but there are significant uncertainties. And I’d just like to see if someone could throw out some guidance on let’s say for – you know like for an E19 bundled customer where you’re showing a 4.1 percent change based on what you know now, if we throw in the gas situation and some of these other uncertainties, you know, are we safe saying it’s 10 percent overall or is it 5 percent or 15 percent kind of an overall feeling on that?

Dan Pease: I really wish we could provide a better answer for you at this time but as you know these are pretty much current events and we’re struggling trying to figure out the impacts of them ourselves. The best information we really have right now is what’s provided here and what’s filed. I can tell you that as a general matter the gas prices that are underlined



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in the electric rates do not reflect the turmoil in the market now. So for example, the utility – the utility purchase costs reflect a gas price of between $7.50 and $8 which is low as indicated by Shawn Halvorson earlier. The DWR power component which would have another fuel cost aspect of it too has an effective gas price of about $9.50. So it’s a little bit – it’s a little bit higher and perhaps more realistic given the current environment but we really haven’t taken that step of trying to incorporate these things into our estimate of electric prices at this time.

Don Hall: Are there other questions?

Operator: Our next question comes from John Keller.

John Keller: You know I assume the DA rates on page 22 have embedded in them the CRS surcharge and if so is it in there at the full 2.7 cents?

Dan Pease: Oh no I doubt it. The question is whether or not the direct access results on page 22 [inaudible] the full 2.7 cents. The answer to that question is that this is a composite of all DA customers and reflects both customers that are – that fully pay the 2.7 cents and those continuous direct access customers that receive some exemptions from it. So it’s a combination of both the DA customers that have no exemptions and those DA customers that have some exemptions to the DWR bond and power charges. Having said that, the customers that fully pay the 2.7 cents and do not have any exemptions are not affected by changes in DWR bond, DWR power, CTC or the energy recovery bond since all those things put together are capped at the 2.7 cents.

John Keller: Okay thank you.

Operator: Our next question comes from Maryallen Juhnke.

Maryallen Juhnke: Good afternoon. I was allowed to join the session late when I was informed that there had been some cancellations and space was available and I am asking for just brief recap please on what you are expecting for gas rate increases for 2006. I know you are evaluating the current situation with the affects of Katrina and recent increases with the gas market, but could you just recap briefly for me what you are anticipating or were anticipating for 2006?

Shawn Halvorson: Yes Maryallen if you can turn to page 12 of the slide presentation and hopefully you’ve opened that. The gas rate expectations for 2006 are shown there and the bottom line on – shows a percentage change over present rates depending on what class you’re in. What class are you specifically referring to?

Maryallen Juhnke: Well I am – I am a commercial user and like Barry I am actually in the process of preparing a budget for presentation next week as well and so I was hoping to gather a little more information as to what you were anticipating for gas prices. But hearing that you’re recently now evaluating present circumstances and these historical events that are happening, I think it’s going to be difficult for any of us to tell.

Shawn Halvorson: Right and the expectations we have here for small and large, somewhere between 29 percent and 35 percent, are primarily driven by that first line if you can see that where there’s a substantial increase in gas procurement.



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Maryallen Juhnke: Okay thank you very much.

Operator: Okay ladies and gentlemen if you have a question at this time please press the one key on your touchtone telephone.

I’m showing no questions at this time sir.

Don Hall: Great thank you. In summarizing, I’d like to remind you that you do have the opportunity to download the presentation. Also regarding all questions that we have been able to listen to or that were submitted that we heard we will be providing a summary, a written summary, of the questions and the answers and there have been some additional questions that came in through the Internet that we have not had a chance to get to or that were more specific to individual customers and we will intend to provide written replies to those questions also and we’ll get all those questions and answers out to you over the next couple of days.

We’d really like to thank you for your participation today. I hope you found the information useful. We clearly heard several key messages. As you have a chance to complete the survey, we hope you take the opportunity to do that, I expect that I would hear some of the keys area; our direct access, the CRS issues, certainly are on the minds of many, the cost impact of the volatility of natural gas prices and the influence that it has on electric pricing, the Prop 80 issue certainly a significant one to all direct access customers and really the future energy markets within California a key issue that we’ll be working with you to follow-up on and questions on the community choice aggregation which is a new opportunity for customers that we will look to identify good messages on all of these issues and continue to follow-up and message to you into the future. If there are other areas that you’d like to hear from us on please use the survey as an opportunity to do that. But with that again I would like to thank you for your participation and this concludes today’s webcast.

Operator: Ladies and gentlemen thank you for participating in today’s conference. This concludes the program you may all disconnect.

Documents

PACIFIC GAS ELECTRIC – UTILITIES · Web viewMoving to slide 16, PG&E’s electric rate changes have been very complicated and not just for us here at PG&E but also complicated to