Pacific Gas & Electric (PCG)

The Utility’s customers could bypass its distribution and transportation system by obtaining service from other sources. Forms of bypass of the Utility’s electricity distribution system include the construction of duplicate distribution facilities to serve specific existing or new customers, the municipalization of the Utility’s distribution facilities by local governments or districts, and other forms of bypass or competition. Bypass of the Utility’s system may result in stranded investment capital, loss of customer growth or additional barriers to cost recovery. Recently, both the Sacramento Municipal Utility District and South San Joaquin Irrigation District have studied the feasibility of condemning portions of the Utility’s electric system within Yolo County and San Joaquin County, respectively. If these agencies continue their efforts, they must satisfy a number of legal steps, which will likely span several years. The Utility opposes these efforts as not being within the best interests of the customers within the subject areas, as well as other customers. The Utility’s natural gas transportation facilities also are at risk of being bypassed by interstate pipeline companies that construct facilities in the Utility’s markets or by customers who build pipeline connections that bypass the Utility’s natural gas transportation and distribution system, or by customers who use and transport LNG. As customers and local public officials explore their energy options in light of the California energy crisis, these bypass risks may be increasing and may increase further if the Utility’s rates exceed the cost of other available alternatives. In addition, technological changes could result in the development of economically attractive alternatives to purchasing electricity through the Utility’s distribution facilities. Neither PG&E Corporation nor the Utility can currently predict the impact of these actions and developments on the Utility’s business, although one possible outcome is a decline in the demand for the services that the Utility provides, which would result in a corresponding decline in the Utility’s revenues and PG&E Corporation’s consolidated revenues.

If the number of the Utility’s customers declines due to municipalization, competition, technological changes or other forms of bypass, and the Utility’s rates are not adjusted in a timely manner to allow it to fully recover its investment in electricity and natural gas facilities and electricity procurement costs, PG&E Corporation’s and the Utility’s financial condition and results of operations could be materially adversely affected.

        The Utility faces the risk of unrecoverable costs if its customers obtain distribution and transportation services from other providers as a result of municipalization, competition, technological change, or other forms of bypass.

        The Utility's customers could bypass its distribution and transportation system by obtaining service from other sources. Forms of bypass of the Utility's electricity distribution system include the construction of duplicate distribution facilities to serve specific existing or new customers, the municipalization of the Utility's distribution facilities by local governments or districts, and other forms of bypass or competition. Bypass of the Utility's system may result in stranded investment capital, loss of customer growth or additional barriers to cost recovery. Recently, both the Sacramento Municipal Utility District and South San Joaquin Irrigation District have studied the feasibility of condemning portions of the Utility's electric system within Yolo County and San Joaquin County, respectively. If these agencies continue their efforts, they must satisfy a number of legal steps, which will likely span several years. The Utility opposes these efforts as not being within the best interests of the customers within the subject areas, as well as other customers. The Utility's natural gas transportation facilities also are at risk of being bypassed by interstate pipeline companies that construct facilities in the Utility's markets or by customers who build pipeline connections that bypass the Utility's natural gas transportation and distribution system, or by customers who use and transport LNG. As customers and local public officials explore their energy options in light of the California energy crisis, these bypass risks may be increasing and may increase further if the Utility's rates exceed the cost of other available alternatives. In addition, technological changes could result in the development of economically attractive alternatives to purchasing electricity through the Utility's distribution facilities. Neither PG&E Corporation nor the Utility can currently predict the impact of these actions and developments on the Utility's business, although one possible outcome is a decline in the demand for the services that the Utility provides, which would result in a corresponding decline in the Utility's revenues and PG&E Corporation's consolidated revenues.

        If the number of the Utility's customers declines due to municipalization, competition, technological changes or other forms of bypass, and the Utility's rates are not adjusted in a timely manner to allow it to fully recover its investment in electricity and natural gas facilities and electricity procurement costs, PG&E Corporation's and the Utility's financial condition and results of operations could be materially adversely affected.