State's pension funds hit it big with energy stocks

The result: relatively small amounts of stock in Pacific Gas and Electric Co. and Southern California Edison, the state's two troubled utilities, and larger total holdings in the increasingly profitable companies that own many California power plants.

The California Public Employees' Retirement System, for example, holds $25 million in stock in PG&E and SoCal Edison, but $410.8 million in stock of energy providers. The State Teachers' Retirement System has $10.3 million in PG&E stock and $339.2 million in energy wholesaler stock.

All the energy stocks, winners and losers, are a very tiny part of their total portfolios -- $169 billion for CalPERS and $106 billion in the teachers' fund.

The stocks were bought long before the current power crisis and most were purchased even before the 1996 deregulation law that is being blamed for the mess, say pension fund spokeswomen.

Both pension funds say their stock purchases follow national indices.

"We didn't choose these because we particularly thought the utility sector was the place to be," Pat Macht, spokeswoman for CalPERS, the nation's largest public pension fund, said Thursday.

CalPERS follows an index called the Wilshire 2500, which lists the 2,500 largest companies and is updated each year.

"What you'll see in our investment philosophy is, don't put all your eggs in one basket," says Macht. "Our hedge against taking a bath when there's one catastrophe to a single company is the very fact that we are invested across all industry sectors and we're invested within industry sectors."

The pension fund has 1.4 million shares of PG&E worth $13.3 million and 1.3 million shares of Edison International, the parent company of SoCal Edison, worth $11.7 million, she said.

CalPERS has much larger total investments in the generating companies: $120.5 million in Duke Energy Inc., $42.4 million in Reliant Energy Inc., $48.7 million in Calpine Corp., $39.7 million in Dynegy Inc., $100 million in AES Inc., $425,000 in NRG Energy Inc. and $59.1 million in the Southern Co.

"We have no reason to panic when a company is having either a good time or a not-so-fortunate period in their life," she added. Companies are held for an average of 10 years.

The State Teachers' Retirement System, with a $106 billion portfolio, has 1.1 million shares of PG&E stock worth $10.3 million and no Edison, says spokeswoman Sherry Reser.

STRS also has $84.3 million in Duke, $34.7 million in Reliant, $46.3 million in Calpine, $41.3 million in Dynegy, $77.4 million in AES, $1.4 million in NRG and $53.8 million in the Southern Co.

She said 80 percent of STRS investments mirror holdings in the national Russell 3000 Index, a list of the 3,000 largest companies. All the STRS holdings have been held since long before the current crisis, she said.

"We are a long-term investor," says Reser. "We do not react to the ups and downs of the markets. It sometimes can be a roller coaster and we're in it for the long haul."

Unlike PG&E and SoCal Edison, the energy wholesalers are doing well. Dynegy Inc., a Houston company that is a major California power generator, reported fourth quarter earnings up 135 percent over the same period in 1999. Duke Energy, of Charlotte, N.C., the owner of four California power plants, more than doubled its revenues in the fourth quarter.

Some other government funds are not allowed by law to invest in any stocks.<