Subject: Update--Day 3 of California PUC Hearings
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Date: Sat, 30 Dec 2000 05:05:00 -0800 (PST)

The Hearings
The hearings have transitioned to the more traditional, courtroom-like 
environment, with lawyers engaged in detailed cross-examination of utility 
witnesses.
The hearing focused solely on the utility claims of financial hardship.
The hearings went from 9AM-5PM and only managed to make it through two PG&E 
witnesses--extensive, detailed questions on PG&E's cash management practices 
since restructuring started in 1998.
Questions to witnesses focused in particular on PG&E's use of cash for 
investment and financing activities over the past 2-3 years (e.g., 
dividend/stock repurchase activities, transfer of cash from IOU to parent and 
parent's use of that cash for investment activities).  
Questions also focused on options other than rate increases available to the 
utility (e.g., liquidate certain assets of unregulated biz units, loans from 
parent, bankruptcy).
The commissioners and the ALJ have reacted in extremely hostile manner toward 
PG&E's repeated attempts to amend and add to their proposal as the hearings 
progress.
Questioning of PG&E witnesses will continue at 10 AM on Tuesday, followed by 
Edison witness.
Unclear when the hearings will end, though the Commission is scheduled to 
issue its decision on Thursday.
At this point, it seems very unlikely that the Commission will have developed 
the record necessary to do anything other than raise rates under its general 
ratemaking authority.

Outside the Hearing
Intense negotiations between Governor's office and utility management 
continue.
Seems that the Commission/Administration is beating up on the utilities 
inside the hearing room in an attempt to soften the utilities up and gain 
some leverage in the negotiations taking place outside the hearing room.
Governor continues to try to bring consumer groups into the negotiations with 
utilities, but consumer groups continue to resist and continue to oppose any 
rate increases.
Governor seems to be attempting to set up a situation where the Commission 
absorbs the political heat for raising rates on the 4th, and the Governor 
follows-up with a more comprehensive set of proposals as part of his state of 
the state speech on the 8th.