Can you guys explain proposistion 9 and how it relates to PG&E stock. I am from out of state and sunk some money into this utility when they were taking over TX operations. I assume it refers to deregulation.
PCG and the other two CA utes were granted 100% retail stranded cost recovery. What is this?
Well, over the years PCG has bought assets that are very expensive. Some they had no choice and had to purchase, like expensive contracts with "green" power producers. But others were things like nuclear power plants.
So in a deregulated environment some of PCGs customers will leave and since PCG has no one else to pass this cost along to the asset becomes "stranded". They dont have a rev. stream to service it.
Therefore, the CPUC authorized PCG et al to include their stranded costs in the local delivery lines. This has had the affect of artificially inflating new competitors overhead costs. The grand total of the bailout is 28 present value dollars for all three utilities.
Prop 9 takes back the portion of stranded costs that PCG et al entered into on a voluntary and business judgement basis. It also takes back some of the funky financing they put together to do it. About 6Bil total.
Why hold on to your hat? Well cowboy, TX has the second highest stranded costs next to CA.