Testimony of Michael Phillips

before the CPUC 9/2003

Question 1. Could you please summarize the main points of your testimony?

Phillips: Four groups have reason to be dissatisfied with the proposed Paragraph 17 and Appendix E of the PG&E settlement. Environmentalist, conservationist, PG&E rate payers and California taxpayers will all find the settlement wholly inadequate.

Question 2. Please explain the reasons each group you mentioned has reason to be dissatisfied with the proposed settlement.

Phillips: The proposed settlement includes the creation of a non-profit Environmental Enhancement Corporation to hold more than140,000 acres of PG&E land.

I begin with the deception that is being foisted on Northern California environmentalists. The proposed settlement appears designed to appeal to environmentalists. The non-profit land holding company has the name Environmental in it. The problem is that environmentalism has a three stage history over the past hundred years and the proposed PG&E settlement is stuck in the first stage, one hundred years ago.

Stage One of the environmental movement is the Teddy Roosevelt era of conservation. The goal was to preserve beautiful landscapes, vast wilderness areas and areas that provided protection for birds, wild life and big game. The Sierra club was born in the Stage One era of environmentalism.

Stage Two environmentalism emerged after Rachel Carson's book Silent Spring in the early 1960's. Environmentalism rapidly became a science and the loss of species and species habitat became an urgent environmental concern.

Stage Two environmentalism recognized a wide range of trends and forces that were damaging the environment. One trend was the rapid growth of suburbs and the destruction of wilderness and farm land. Another was the irresponsible destruction of biologically sensitive habitat such as wetlands. Still another was the need of many species for long contiguous breeding and migratory routes. Trust for Public Land was a non-profit born of the second stage environmentalism. Trust for Public Land preserves a diverse spectrum of land for scientific, green belt, urban usage and habitat reasons.

Stage Three environmentalism has developed over the past thirty years. Stage Three environmentalism is focused on the need to bring environmental issues directly into the lives of urban dwellers. Stage three environmentalism is concerned with preserving scarce resources, such as energy conservation, developing better transportation systems, expanding environmental education and involving urban populations directly in food supply, resource use, environmental and sustainability issues.

The CPUC should focus its environmental concern on Stage Three environmentalism. Stage Three environmentalism will clearly have the greatest positive impact on the environment because it involves more people in more effective action.

I have attached (not online) a list of local Stage Three environmental activist groups that are deeply involved in the current environmental movement. I have personally talked with a sizable number of these groups and they are almost universal in their view that the PG&E settlement, as I described it to them, was misleading in its use of the term environmental and nearly worthless in helping the environment itself.

You will notice that no non-profit on this list uses the term "Corporation" in their name. The term "corporation" is inappropriate for a non-profit organization.

Question 3. How would you summarize the point of Attachment A that you are submitting for this section of your testimony?

Phillips: Attachment A (not online) is a list of 27 highly respected, non-profit environmental organizations that are representative of the genuine and relevant environmental movement. These organizations, and many more like them, are totally excluded from the proposed PG&E settlement. The settlement deals only with an archaic notion of conservation, not with environmentalism. The proposed settlement completely excludes the new urban concerns of environmentalism that have developed in the past one hundred years; the new urban perspective is central to environmentalism.

Question 4. Will you be offering constructive suggestions to remedy this problem with the settlemen

Phillips: Yes, at the end of my testimony.

Question 5. The next group you said would be dissatisfied with the settlement are conservationists.

Phillips: Conservationists have two very strong reasons for rejecting the proposed EEC settlement. First, a significant part of the 140,000-plus acres is not conservation land. Conservationists are being misled, just as the environmentalists are. Second, the part of the acreage that is conservation land is being transferred from a private regulated corporation, where the land is protected to a non-profit that will possibly fail in the long term. If the non-profit fails, it will have to turn the conservation land over to government agencies for taxpayer support.

A significant part of the 140,000-plus acres is not conservation land. I estimate that more than 650 out of the 1043 parcels in the proposed settlement are not conservation land. I do my calculations based on using figures offered in the testimony of Scott J. Rafferty on August 27, 2003, and by my own count of parcels in the maps attached to Randal S. Livingston's testimony of July 25, 2003.

Too many of the pieces of land in the proposed settlement are stand alone parcels that can not be considered valuable for scenic purposes, for wildlife refuge or habitat purposes, nor for wildlife migratory or mating purposes. These parcels are too small to be conservation land. According to the Rafferty data, half the parcels are under 58 acres. An acre is about equal to a football field so 58 square acres is less than seven football fields wide.

I personally can testify on the unsuitability of some of the land in the proposed settlement. Attachment B1(top image) is a detailed map of a part of the proposed EEC land in the Drum Watershed. Attachment B 2 (bottom image) are four photos of the land that is proposed for EEC holdings. I flew over the land and had a photographer take pictures. From 200 feet above this land, I can state firmly that his land has a higher and better usage than conservation. This land is not desirable conservation land. The land is already scared, defaced and most suitable for residential development.

The non-conservation quality of much of the proposed EEC land presents the second serious and possibly insurmountable problem for conservationists.

Conservation land needs care, management and active maintenance. Conservation land is costly. The proposed EEC is to be given $70 million.

I wish to testify to one thing for certain. A large number of the parcels held by EEC will have to be sold off because they are not appropriate conservation land. It will be costly to sell off this land, parcel by parcel.

I have no idea whether the net gains from the sale of this non-conservation land will be greater than the cost of holding it until after the sale is made and I have no idea whether the net gains will cover the cost of selling the land. PG&E has offered no data on this matter.

It is entirely possible, even likely that the cost of selling off all the non-conservation land will exceed the money needed from the $70 million to protect and maintain the remaining genuine conservation land.

Conservationists have every reason to be disappointed with the proposed PG&E EEC settlement.

Question 6. Will you offer proposals to remedy this situation?

Phillips: Yes.

Question 7. The next group you said would be dissatisfied with the settlement are PG&E ratepayers.

Phillips: The ratepayers of Northern California are predominantly urban. The Greenlining Institute represents the largest as well as the fastest growing segments of the Northern California urban ratepayers. The proposed PG&E EEC settlement completely ignores this ratepaying group.

Many of the urban ratepayer population, represented by Greenlining, are users of state and federal parks and users of recreational facilities in rural areas. However, as mentioned earlier, the urban ratepayer population are very supportive of the environmental movement when it has impact on their lives. The ratepayer population that Greenlining represents benefit from Stage Three environmentalism that is concerned with energy conservation, resource conservation, better transportation, park land, urban land restoration and more livable cities.

Ratepayers have another reason to be concerned unless their concerns are addressed in these hearings. Scott J. Rafferty in his testimony states that land transferred from PG&E to the EEC will be removed from the rate base. As a consequence, the many parcels of land that the EEC will be forced to sell will not benefit the PG&E ratepayers when they are sold for a capital gain. If PG&E directly sold these parcels, some of the 650 that I have testified should be sold, the capital gains would reduce the rate base and consequently ratepayer rates.

After these 650 parcels are transferred to the proposed EEC, the ratepayers would not benefit from the decline in the rate base.

Question 8. The last group you said would be dissatisfied with the settlement are California tax payers. Would you explain that point.

Phillips: I expect the EEC to find the cost of protecting and maintaining their land holdings will exceed the available funds out of the $70 million available during the seven years of funding. After the funds run out, the EEC will be forced to donate the land to local and state government agencies and the cost of protecting and maintaining the land will be in the tax payer's hands.

I expect the watershed lands that PG&E now protects and maintains at corporate expense under State and Federal regulatory authority will, in a few years, become government managed land with expenses paid for by the California tax payer.

Question: 9 Do you have some alternate suggestions for the CPUC that will address the concerns raised in your testimony?

Phillips: Yes, a three step proposal.

First, the CPUC should direct PG&E to divide the 1043 parcels of land in the proposed settlement into two categories: (a) land directly on primarily suited to traditional conservation, scenic and wildlife concerns. (b) all other land.

Second, provide the endowment funding that will be sufficient to protect and maintain the category (a) land and demonstrate conclusively that the endowment is sufficient to do the job.

Third, identify all the land in category (b) non-traditional conservation land, and invite proposals for the use and transfer of that land to qualified urban environmental non-profit organizations for use in benefiting urban populations.

Fourth, make sure that all land transferred out of the PG&E portfolio is used to reduce the rate base.

Fifth, the CPUC should direct PG&E to add additional surplus land to category (b) non-traditional conservation land. I have been told in confidence by knowledgeable state officials that PG&E owns significant amounts of surplus land that is not included in the 1043 parcels of the proposed Paragraph 17 EEC settlement.