Pacific Gas and Electric Company (PCG) has requested state regulators to give it the right to offer a competitive electric rate to large employers. This will help in attracting large employers to California and convince other large existing employers to continue or expand their operations here rather than quitting. The plan helps large employers to negotiate power purchase rates.
The company would offer a 12.0% rate reduction for five years to large companies with power loads of at least 200 kilowatts and those large employers who admit that the economic development rate would help them to site new operations, expand existing facilities, or continue their operations in California.
Moreover, the company plans to propose a more significant rate reduction of 35% for five years to employers of the service area facing acute challenges and have unemployment rates at least 25% higher than the state average.
By expanding local businesses and attracting employers back to hard-hit communities in California, the company’s program will help jump-start an economic recovery that generates jobs essential for healthier communities.
Besides offering appropriate incentives, the company provides affordable, reliable and clean energy to its customers. The company has announced that out of the total electricity delivered in 2011, 19.4% came from renewable resources such as wind, solar, geothermal, biomass, and small hydroelectric as compared to 15.9% in 2010. With this significant progress toward meeting California’s ambitious clean energy mandates, the company believes that it is on track to achieve the state’s target of 33% from renewable energy by 2020.
The company continues to pursue opportunities to add more clean electricity to its portfolio. Since 2002, it has signed more than 110 contracts for about 10,000 megawatts of renewable power. Currently, twelve renewable projects with a total generation capacity of 1,366 MW are under construction and on track to meet their delivery dates.
We believe that the company’s supportive regulatory environment in California, particularly its decoupling mechanism and forward looking rate cases, ensures a steady stream of earnings and returns. Going forward, favorable decisions from regulators, long-term supply contracts, diversification into alternative power sources and infrastructure improvement programs bode well for the company.
These positives, however, will be partially offset by risks, including the present unfavorable macro backdrop, headwinds in the California economy, tepid demand for electricity, risk of penalties related to the San Bruno pipeline explosion and power-price volatility. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
San Francisco, California-based PG&E Corporation is the parent holding company of California’s largest regulated electric and gas utility, Pacific Gas and Electric Company (Pacific Gas). The company mainly competes with Edison International (EIX) and Sempra Energy (SRE).
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